Con­tracts en­sure long-term coal price and sup­ply sta­bil­ity

China Daily (Hong Kong) - - BUSINESS - By YANG ZIMAN yangz­i­man@chi­

Large coal com­pa­nies in China signed mid- and longterm con­tracts with power and steel com­pa­nies on Thurs­day in or­der to sta­bi­lize fluc­tu­at­ing coal prices.

Shan­dong-based Yankuang Group, Shaanxi Coal and Chem­i­cal In­dus­try Group Co Ltd and Hei­long jiang Long­may Min­ing Hold­ing Group Co Ltd are among the 10 coal com­pa­nies that signed mi­dand long-term con­tracts with ma­jor power and steel com­pa­nies at the coal trad­ing con­fer­ence held in Qin­huang­dao, a ma­jor coal port in He­bei prov­ince, on Thurs­day.

The con­tract sign­ing fol­lowed the one be­tween top coal pro­duc­ers and ma­jor in­dus­trial con­sumers at the end of Novem­ber, in­clud­ing Shen­hua Group, the largest coal com­pany in China by out­put, China Na­tional Coal Group Corp, the top five power gen­er­a­tion com­pa­nies and the top six steel smelters.

“Mid- and long-term con­tracts will as­sure coal pro­duc­ers of their mar­ket share and coal con­sumers of the pro­duc­tion re­sources, keep­ing the prices within a rea­son­able range,” said Wang Xianzheng, pres­i­dent of the China Na­tional Coal As­so­ci­a­tion.

Ac­cord­ing to a no­tice is­sued in Novem­ber by the Na­tional De­vel­op­ment and Re­form Com­mis­sion, coal com­pa­nies with mid- and long-term con­tracts will be given pri­or­ity in trans­porta­tion and have fewer ca­pac­ity re­stric­tions. Power com­pa­nies with mid- and long-term con­tracts en­joy pri­or­ity in en­try to the na­tional grid.

“The re­cent fast-ris­ing coal prices have prompted some com­pa­nies to re­lease ca­pac­ity. But we need to re­main cool­headed that the over­all de­mand for coal has not in­creased,” said Lian Weil­iang, deputy di­rec­tor of the com­mis­sion.

Lian said that the coal sup­ply re­mains plen­ti­ful. Af­ter the heat­ing sea­son is over, the price will drop slightly. The govern­ment will take mea­sures to en­sure that the price fluc­tu­ates within an ac­cept­able range.

The price of power-coal at Qin­huang­dao Port rose from 370 yuan ($53) per met­ric ton at the be­gin­ning of the year to 550 yuan per ton in Septem­ber.

“The price hike is partly due to the de­crease in hy­dropower gen­er­a­tion this year, which led to higher de­mand for coal­fired power, ca­pac­ity re­duc­tion and the ris­ing coal price in the in­ter­na­tional mar­ket,” said Wang.

Coal prices should be within a range of 550 yuan to 600 yuan per ton, Wang added.

Coal-fired power gen­er­a­tion in Au­gust, Septem­ber and Oc­to­ber in­creased by 11.2 per­cent, 15.8 per­cent and 18.5 per­cent, re­spec­tively, com­pared with the same pe­riod last year.

Ac­cord­ing to the CNCA, coal con­sump­tion has been on the slide in re­cent years. The yearon-year de­crease was 2.9 per­cent in 2014 and 3.7 per­cent in 2015.

This year, to­tal coal con­sump­tion in the first 10 months was down 1.9 per­cent com­pared with the same pe­riod last year. It is ex­pected that to­tal con­sump­tion this year will be 3.9 bil­lion tons, down 50 mil­lion tons, or 1.3 per­cent, from last year.

The price hike is partly due to the de­crease in hy­dropower gen­er­a­tion ...” Wang Xianzheng, pres­i­dent of China Na­tional Coal As­so­ci­a­tion

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