China to Maintain Coal Price Cap in 2023 to Avert Energy Crunch
November 3, 2022 - China has extended the price limit on thermal coal in 2023 as the country looks to expand the use of the fuel to help stabilise prices and ensure market supply, reported Bloomberg News.
The expanded long-term thermal coal supply contracts for 2023 cover all coal mining companies, coal-fired power and heating plants, reported Economic Times via Reuters citing a document issued by the country’s top economic planning body National Development and Reform Commission (NDRC).
With the expanded coverage, the country intends to reduce coal supply in the spot market while ensuring supply to power utilities.
This move is expected to avoid a coal shortage in the country that resulted in unprecedented power outages last year.
The government asked power utilities to source additional feedstock through those long-term contracts.
For the 2023 term contract, the state planner will maintain the coal benchmark price of $92.76 per tonne for coal with an energy content of 5,500 kilocalories.
The NDRC document, which was also confirmed by two market participants, is requiring all participants to finalise the 2023 contracts before 25 November 2022.
Additionally, the NDRC requires coal mines to sell at least 80% of their overall production capacity and 75% of their thermal coal production capacity under long-term contracts.
Supply would be prioritised to power plants over other industrial users, according to Bloomberg News.
If the coal miners fail to meet the deliveries, they will be ordered to supply three times the initial coal volume as compensation to their original customer, reported the publication citing the notice.