Chinese coal giants try to stabilize supply, price

BEIJING - Seven of China's major coal-producing groups have called on the sector to boost supply and keep prices within a reasonable range, as increasing domestic demand fuels rising pressure in the spot market.

In a joint initiative by the national coal association as well as the coal transportation and distribution association, the seven energy suppliers stressed the need to ink medium and long-term contracts at an early date in 2021, which could serve as a prop for price stability.

China Energy Investment Group, China National Coal Group Corporation, and five key producers in northern China's coal-rich provinces said efforts should be made to enhance guarantees for supply, ensure supply to key regions, and implement price-stabilizing measures formulated by the country's top economic planner.

More than 80 percent of China's coal supply is under medium and long-term contracts with prices between 540 yuan ($83) and 550 yuan per ton.

Due to the impact of COVID-19 and changes in demand and supply in 2020, the country's coal prices experienced a V-shaped trajectory. A two-and-half month decline cycle started in mid-February, followed by a low point in early May and then a subsequent rise about a month later. Prices have been rising since September 2020.

The demand for coal rose remarkably this winter due to lower temperatures and robust demand by the electricity, steel and construction materials sectors.

Authorities have pledged more efforts to increase supply and adjust demand to lower coal prices.

The supply of coal will be sufficient to meet a spike in demand during the winter heating season, and the supply and demand in the coal market is generally balanced with sufficient supply for this winter and spring, according to the National Development and Reform Commission, China's top economic planner.

Coal prices went up in the spot market, while power plants mainly use coal purchased under medium and long-term contracts, so the price of coal they are using is stable, according to the commission.