Coal firms see share prices surge Monday, after government readjusts contract prices

Share prices of China’s coal enterprises jumped on Monday on the A-share market following a nationwide adjustment to annual thermal coal prices beginning next year for medium and long-term contracts.

Stock of Inner Mongolia Yuan Xing Energy Co jumped 6.63 percent as of press time, Guanghui Energy was up 6.04 percent.

The market spike followed the release of a work plan addressing the signing of medium and long-term coal contracts in 2022, drafted by the National Development and Reform Commission (NDRC), China’s top economic planner.

The supply side will cover all coal production firms with an approved production capacity of 300,000 tons per year and above, and the demand side will achieve full coverage of coal for power generation and heating for the first time, according to a report by the Economic Information Daily on Monday.

The NDRC issued the plan for seeking public input during the National Coal Trade Fair, which concluded on Sunday in Rizhao, East China’s Shandong Province.

China will beef up efforts to ensure stable supply of coal and energy next year, according to officials attending the industry summit, with the main driver – the medium and long-term coal contracts – playing a key role in stabilizing the market.

The plan also set annual thermal coal prices for 2022 at between 550 yuan and 850 yuan ($86-$133) per ton, with the benchmark price adjusted for the first time from 2017’s 535 yuan per ton to 700 yuan per ton.

The medium and long-term contracts refer to contracts signed by players on both the supply side and the demand side for a period of one year or longer with a clear quantity and price mechanism.

The adjustment partially filled the price difference between contracted coal and spot coal, and allows coal prices to fluctuate within a larger range. The market’s previous pessimistic sentiment regarding the strong supervision of coal contract prices has been significantly eased, and a more reasonable long-term agreement also helps stabilize the fluctuation range, according to an analysis note by Shengang Securities.

China has been pushing coal miners to ramp up output and increase imports to stabilize coal prices and ensure supply during the winter-heating season. Coal output reversed a falling trend to increase in October.

The volume of coal transported by rail and sea in China saw a surge in October and November, official data showed.

On average, about 86,300 trains loaded with coal had departed from local areas in China every day from November 1 to 15, an increase of around 10,000 trains, or 13.5 percent from last year, data from the China State Railway Group Co showed.

Port spot prices and futures prices for coal also fell rapidly.

“Although we see obvious effects in securing coal supply at the moment, there is still pressure and uncertainties in the future. After December, the northern region of the country will enter peak winter season, which will have higher demand for coal supply,” Lu Junling, head of the coal department of National Energy Administration, said at the coal fair, adding that coal firms should strengthen organic connection of production, transportation and supply.
Source: Global Data