November 20, 2017 / 11:34 AM / a month ago

China's coal miners to keep contract prices for next year stable

BEIJING (Reuters) - China’s biggest coal producers China Energy Investment Group and China National Coal Group (ChinaCoal) will keep their 2018 coal contract prices at the same level as 2017, two sources with direct knowledge of the matter said on Friday.

After rounds of discussions between policy makers, major producers and utilities, the producers will set the price at 535 yuan ($80.72) per tonne, the sources said.

The new level has disappointed utilities just one week before China’s annual coal trade meeting in the northern port city of Qinhuangdao from Nov. 21 to 23 when producers and utilities will negotiate volumes for next year.

The price “is a bit too high for us,” said one of the sources, a manager at a power plant.

The utilities had sought a price between 500 and 518 yuan a tonne, near the breakeven line for the power plants, said the source.

China Energy, formed from the merger China Shenhua Group and China Guodian Corp, and ChinaCoal rejected that proposal, said the source.

Last year, the National Development and Reform Commission (NDRC), China’s top economic planner, asked coal producers to sell at 535 yuan per tonne to bring down rising prices.

Analysts said rolling the policy over to this year will not help lower coal prices. Spot coal for delivery at Qinhuangdao is at 615 yuan ($92.76) a tonne, according to data from consultants Steelhome.

“The long-term contract prices, which is much lower than current spot prices, will not help dampen coal market at this point,” said Wang Fei, a coal analyst with Huaan Futures, “The early arrival of winter chills will contribute to robust demand.”

The NDRC, China Energy and ChinaCoal did not immediately reply to requests for a comment on Monday.

($1 = 6.6301 Chinese yuan renminbi)

Reporting by Meng Meng and Josephine Mason; Editing by Christian Schmollinger

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