China has seen more than 2.5 billion tonnes of medium- and long-term power coal contracts signed so far for 2023, basically marking 100% coverage of power coal demand it aims to realize, China's state planner said lately.
This has progressed from a 95.8% coverage rate with 2.28 billion tonnes of term contracts inked as of January 3 this year, indicating China's continued efforts to tap this mechanism to stabilize domestic fuel supply and prices.
Last year, the country vigorously boosted coal production while bringing more cargoes into long-term contract mechanism, in order to cushion hits from global energy supply and price volatility since the Russia-Ukraine conflict.
The National Bureau of Statistics in a statistical communique on Feb 28 said China's raw coal production totaled 4.56 billion tonnes in 2022, a marked growth of 10.5% year on year. But still, its annual term contract prices and spot prices posted rises of 11% and 25% in 2022, dwarfed much by an aggressive 100% jump in global coal prices though.
The largest coal consumer has moved to impose stricter supervision on contract fulfillments and execute serious crackdown on noncompliance to facilitate positive influences of term contracts on domestic coal market.
In November 2022 alone, authorities in Inner Mongolia, Shandong, Jiangxi, Fujian and Guangdong publicly criticized 16 firms for coal price gouging, which also helped give a strong warning against such wrongdoings and stabilize prices.
The 2023 rule that defines power plants should be compliant once contracts are agreed implicates that utilities may keep high coal inventory this year. This was evidenced by a 38% rise in average stocks at coastal power utilities as of February 22 this year compared with the same period in 2021, though generally flat from a year ago.
Following a one-week surge, spot thermal coal market pulled back with fading faith in sentiment support for the market, as power utilities still shunned booking news cargoes amid expectation of lower coal demand approaching the end of winter heating season in northern China and lack of strong vitality in industrial sector.
As of March 1, trading prices of 5,500 Kcal/kg and 5,000 Kcal/kg NAR coal fell to 1,190-1,200 yuan/t and 1,010-1,020 yuan/t, FOB northern ports with VAT.
(Writing by Tammy Yang Editing by Alex Guo)
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