China issues guideline for 2023 domestic thermal coal contract signing

sxcoal.com Policy,  Thermal Coal 2022-11-21 10:32:28

China's national economic planner late last week issued the guidance for the signing of 2023 domestic thermal coal medium- and long-term contracts, a key move to shape the overall supply pattern next year, market sources disclosed.


The new guideline has brought some new changes that are worth noting. The National Development and Reform Commission (NDRC) ramps up the overall contract volume to 2.9 billion tonnes next year from 2.6 billion tonnes in 2022.


It also introduces seven trading companies to participate in the contract supply in 2023, which is different from the existing practice that miners directly reach contracts with end users. These trading companies will be serving as agents for smaller-sized miners and utilities.


The NDRC keeps the benchmark reasonable range for contract prices at 570-770 yuan/t, basis 5,500 Kcal/kg NAR, FOB with VAT at northern ports, the same with this year.


Meanwhile, the NDRC stresses high contract fulfillment. Suppliers should put the clause "triple compensations for uncompleted volumes" into pacts, and all volumes and prices will be under supervision by the government.


The government prioritizes financial and political supports to contract supply, such as special funds to support safety upgrade and capacity expansion at contract supply mines, which can also retain capacity if the government starts cutting production when the market is oversupplied.


The railway department also gives priority to contract cargoes over spot ones.


Meanwhile, the NDRC will link term coal contracts with term electricity contracts, which means power prices will change in sync with coal prices, a move to safeguard power plants' interest and ensure energy supply.


The signing work should be completed ahead of December 5 after a public disclosure by major producing regions before November 25.


In Inner Mongolia's Ordos, the top coal hub in China, 14 coal miners have signed contracts with 50 power and heat plants in 10 other provinces and cities, with the combined volume at 180 million tonnes.


(Writing by Alex Guo  Editing by Tammy Yang)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

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