The recent hikes in spot coal prices will not affect the security of coal consumption related to people’s livelihood, Meng Wei, spokesperson for the National Development and Reform Commission (NDRC) said in a press conference in Beijing on December 16. Spot coal accounts for only a small part of China’s coal market, Mysteel Global notes.
“We noted that the spot coal prices increased recently, but as most of the coal consumed by power plants is procured under annual medium- to long-term contracts, (China’s) coal prices were generally stable,” she commented.
Based on data monitored by NDRC, more than 80% of China’s coal demand was covered by medium- to long-term coal contracts signed between coal miners and end-users, at the price of Yuan 540-550/t ($82.6-84.1/t), Meng further explained.
Coal demand has grown substantially this winter compared with the same period over the past few years, according to Meng, thanks to buoyant demand from the electricity generation, steelmaking and construction materials industries. Low temperatures have also resulted in higher coal consumption for heating purposes.
Nevertheless, social coal consumption has been secured. At present, coal stocks at Chinese power stations could sustain the plants for an average of 21 days of consumption. In fact, stocks in Northeast China’s Heilongjiang province, the country’s coldest province in winter, could sustain power plants for 31 days, a comparatively high level, Meng said, citing the data.
“Northeast China is the key region for coal supply during the winter heating season,” she said, saying that in July during summer, the commission had started to organize coal replenishment to build winter reserves. Coal supply sources for Northeast China had been secured ahead of the heating season.
Chinese market participants have been concerned about the supply tightness of thermal coal, chiefly because coal imports are being controlled and the country’s domestic supply was partially curtailed by safety checks, Mysteel Global understands, just as demand in winter continued to grow.
As of December 16, Mysteel’s price assessment for 5,500 kcal/kg spot Shanxi thermal coal had soared by Yuan 75/t on week to a 34 month-high of Yuan 765/t including the 13% VAT at Qinhuangdao port in North China’s Hebei, far above the ‘warning’ line of Yuan 600/t nominated by NDRC.
Written by Sean Xie, Mysteel
Edited by Russ McCulloch, Mysteel
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