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China's NDRC urges coal miners, end-users to enter term contracts for 2018

https://www.chemnet.com   Nov 17,2017 Platts
China's National Development and Reform Commission has asked domestic miners and buyers to enter into term contracts for 2018 to ensure supply and maintain stability in the domestic thermal coal market, trade sources said Tuesday.

In a statement dated November 10, the country's top economic planner said miners and end-users should continue to refer to the current year's price formula in setting new term prices for 2018 contracts, which is based on a fixed price plus a floating price mechanism.

The fixed price component should be mutually agreed by suppliers and end-users depending on the supply and demand situation, NDRC said, adding that even if the parties cannot enter into an agreement for long-term contracts, the base price cannot exceed that of 2017 levels, NDRC said.

For 2017 term contracts, the base price is set at Yuan 535/mt. The floating price mechanism is calculated using the average of Bohai Sea Rim Steam Coal Price Index and CCTD index for 5,500 kcal/kg NAR material minus the fixed price component, and dividing by two.

NDRC also urged market participants to sign contracts for at least one year with fixed coal volumes and a clear price formula.

Coal miners and major utilities should commit at least 75% of their production or consumption under term contracts. Railways, ports and related logistics would give priority to those cargoes under term contracts, NDRC said.

NDRC has also encouraged miners and buyers to engage with each other directly and avoid middlemen costs.

The commission said that once term contracts are signed, the performance rate should be higher than 90% and it will directly monitor contract fulfillment wherever volumes are higher than 200,000 mt/year.
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