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China urges coal miners and utilities to fulfil term contracts

China’s state planner urged coal miners and power plants to fulfil at least 80% of the signed medium- and long-term coal contracts each month, it said in a statement.

The move is a standard practice for Beijing to take each year as the government is keen to maintain steady market supply and prices as more than half of the electricity in China is generated from coal.

Chinese authorities since late last year ordered coal miners to increase supply to utilities after a nationwide power crunch, partly due to insufficient supply and runaway prices of coal, disrupted industrial activity.

The National Development and Reform Commission (NDRC) also said that the signed term contracts should be implemented by at least 90% on a quarterly or annually basis.

All these termed contracts will be recorded at a national system online and monitored by the authorities. While enterprises failing to meet the requirements will be punished, it said.

To balance the profits of coal miners and power generators, the NDRC last week set a reference price range for the benchmark 5,500 kcal thermal coal for medium- and long-term trading at 570-770 yuan ($86.98-$121.77) a tonne.

The state planner has hoped to guide spot and futures trading with the termed contract prices, but fears on supply disruption amid the Ukraine conflict has pushed up benchmark coal prices around the world.

Most-traded thermal coal futures contract for May delivery CZCcv1 surged 7.9% on Wednesday to 857.8 yuan ($135.84) a tonne, its biggest intra-day jump in a month.
Source: Reuters (Reporting by Muyu Xu and Emily Chow, Editing by Louise Heavens)

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