China has expanded long-term thermal coal supply contracts for 2023 to all coal mines and asked power utilities to source more of their demand through those contracts, as it aims to ensure market supply and stabilise prices.
The world’s second biggest economy still relies on coal to generate 60% of its electricity, and its President, Xi Jinping, has repeatedly emphasised the vital role of the fuel – a major contributor to global warming – in the country’s energy security strategy.
All coal mining firms and coal-fired power and heating plants will be covered under the long-term contracts, a document issued by the National Development and Reform Commission (NDRC) showed, a wider range compare to 2022’s order of covering only mines with annual capacity bigger than 300,000 tonnes.
The expanded coverage is expected to reduce coal supply in the spot market but better ensure supply to power utilities, avoiding a repeat of a nationwide coal shortage that led to unprecedented power outages in 2021.
Coal mines should put at least 80% of their overall output and 75% of their thermal coal output under the long-term contracts, while all production capacity approved since September 2021 will have to be included.
The NDRC document, seen by Reuters and confirmed by two market participants, wants all participants to have signed the 2023 contracts before Nov. 25.
The NDRC did not immediately respond to a Reuters request for comment.
The state planner is also maintaining the benchmark price for coal with energy content of 5,500 kilocalories at 675 yuan ($92.76) a tonne for the 2023 term contract.
Firms that failed to honour their contracts will have their supports in new capacity approvals, rail transportation and financing reduced, the document also states.
