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November 10, 2016

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Long-term deals for coal prices urged

CHINA is promoting medium and long-term deals between coal producers and buyers to stabilize supply and curb market volatility as surging coal prices have heated concerns about the industry’s ongoing cuts on excessive capacity.

Major coal miners Shenhua Group and China National Coal Group Corp on Tuesday inked such contracts with China Huadian Corp and State Power Investment Corp, both thermal power conglomerates.

The two sides specified the amount of coal supply for the contract duration and set a basic price of 535 yuan (US$79) per ton, with clauses to allow for market-oriented price adjustments. No further details were disclosed.

The cooperation of state-owned coal and power companies is the latest push by the authorities to ease the current coal shortage.

“It will help maintain the stability of coal prices and the market,” Xu Kunlin, deputy secretary-general of the National Development and Reform Commission, said at a press conference yesterday.

Xu promised policy support and encouraged more mid- and long-term contracts to be inked in the sectors.

Coal prices are on the rise due to a temporary supply shortage, as well as temperature drops and speculative activities.

The Bohai-Rim Steam-Coal Price Index, a gauge of coal prices in north China’s major ports, rose to 607 yuan per ton last week, the 18th straight rise and 63.6 percent up on the start of the year.

Xu described the price hike as “irrational.” China’s coal reserves remained stable as effective output capacity stood at around 5.4 billion tons after outdated and under-performing mines were shut down.

“We are completely capable of guaranteeing coal supply,” Xu said.


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