10 Chinese coal producers sign long-term contracts to stabilize prices

Ten Chinese coal producers Thursday signed medium and long-term contracts with buyers in a move directed by the government to further stabilize the market.

China's coal prices have been rising over the past months due to a number of factors, including a campaign to cut overcapacity. The price hike was stemmed only a month ago after government intervention, when at least three of the country's top coal producers signed long-term contracts with buyers at fixed prices.

Ten companies followed suit at the national coal trade fair held in Hebei Province on Thursday. The buyers were mainly thermal power stations and steel makers.

Lian Weiliang, deputy head of the National Development and Reform Commission, said the long-term contracts will stabilize market expectations and match supply with demand.

He said coal producers are given freedom to change prices within a set range. Other incentives, including priority in rail transport, are provided to companies honoring the contracts.

Lian predicted that coal prices would decline further, especially when the winter heating season ends, but not to levels below 370 yuan per tonne (53.6 U.S. dollars).

As of Nov. 30, the Bohai-Rim Steam-Coal Price Index, a gauge of coal prices in northern China's major ports, retreated to 599 yuan per tonne, while prices of thermal coal futures traded on Zhengzhou Commodity Exchange fell to 580 yuan per tonne.

Wang Xianzheng, head of the China National Coal Association, said with more long-term contracts signed, coal prices should be managed at a range between 550 yuan to 600 yuan per tonne.

China is the world's largest consumer of coal. The industry has long been plagued by overcapacity and has felt the pinch over the past two years as the economy cooled and demand fell.

Coal producing capacity was reduced by about 250 million tones in 2016. Endit