Under govt pressure, China's top coal miners to cut long-term prices

[BEIJING] China's state economic planner said two of the nation's top coal mines signed long-term supply contracts with utilities at a quarter below current spot market rates, as the government ramps up its efforts to cool the red-hot market.

Shenhua Energy Co and ChinaCoal Energy Co agreed to sell their coal at 535 yuan (S$110) per tonne under long-term deals which start as soon as Dec 1, Xu Kunlin, vice secretary general of the National Development & Reform Commission (NDRC), said at a briefing on Wednesday.

Traders said the price would not necessarily set a trend for the market if other miners do not agree to the terms. One Asian trader said the deals would be "meaningless" without broader industry support.

While markedly lower than the record-setting spot market, the price is still relatively high historically. However, it does suggest that the months-long rally may not be sustained as more supply hits the market in the new year, three coal traders said.

"It is still a fair deal for ChinaCoal and Shenhua, even though the spot price is at 700 yuan," said Wang Fei, analyst at HuaAn Futures.

Coal was being offered as high as 740 yuan per tonne on Wednesday, the traders said.

This is the first time the NDRC has held a press briefing to discuss this year's historical coal price rally and concerns about tight supplies.

Thermal coal prices have hit fresh records on an almost daily basis in recent weeks after government-enforced closures earlier this year tightened supplies for electric utilities, triggering a scramble ahead of the winter.

Getting miners to fix prices has been a key part of the government's effort to tame the price spike that it says is unjustified by fundamentals. The news on Wednesday follows a series of changes to the way China, the world's top energy market, prices the commodity.

On Tuesday, China's three major commodity exchanges launched a series of fee hikes and margin increases for some of their most volatile, niche contracts, including coal, as authorities cracked down on speculation.

The NDRC, which has pledged to ensure coal supplies over the winter months, also said at the briefing it was investigating a Shanxi-based coal data firm because its data "has problems".

While the NDRC did not give any details, FenWei Energy, also a Shanxi-based coal data company, late on Tuesday suspended its spot physical thermal coal price index - used as the domestic industry benchmark - saying its prices did not reflect the majority of business transacted in the country.

Also at the briefing, the government said it would extend a rule limiting some mines to operate only between 276 and 330 days in a year until the end of spring.

REUTERS