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How will long-term contracts affect China's coal market in 2017?


How will long-term contracts affect China's coal market in 2017?

Report summary

In November, the National Development and Reform Commission (NDRC) mandated coal miners and coal users to sign long-term contracts for 2017 with a predefined pricing formula. In response to the NDRC's call, Shenhua and China Coal – the two largest coal miners in China – and the five largest power generation companies signed long-term contracts for 2017 in November. In December, more coal miners and users have signed long-term contracts. The long-term contracts for 2017 differ from previous years' practice in pricing and implementation. Regulating the price formula in the new contracts is among the NDRC's key measures to pull soaring thermal coal prices back down. The new contracts will reduce coal miners and users' exposure to spot prices, and reduce the volatility in domestic thermal coal markets.

What's included?

This report includes 2 file(s)

  • How will long-term contracts affect China's coal market in 2017? PDF - 283.88 KB 6 Pages, 1 Tables, 4 Figures
  • Long term contract 2017.xls XLS - 207.00 KB

Description

This Coal Insight report highlights the key issues surrounding this topic, and draws out the implications for those involved.

Participants, suppliers and advisors can use it to look at the trends, risks and issues within the coal industry and gain an alternative point of view when making decisions.

Wood Mackenzie is the only coal industry service provider that offers a market outlook integrated with other sector analyses, including macroeconomics, coal supply, steel markets and gas and power markets.

Our coal analysts are based in the markets they analyse. They work with objective, proprietary data to help you maximise your current and future decision making. From market dynamics to trade patterns, we give you confidence in your strategic planning.

  • Executive summary
  • The evolution of long-term coal supply contracts in China
    • Before 2017: long-term contracts followed spot price trends on ad-hoc basis
    • 2017 long-term contracts: the key characteristics
  • How will these long-term contracts affect China’s coal market?
    • The fall of spot prices will accelerate
    • Long-term contract price and spot price will converge
    • High-cost imported coal supply will exit the Chinese market
  • Risks
  • Conclusion

In this report there are 5 tables or charts, including:

  • Executive summary
  • The evolution of long-term coal supply contracts in China
    • How will long-term contracts affect China's coal market in 2017?: Image 1
    • Historical price changes in annual contracts
    • Spot price trends by BSPI, CCTD and CCI
  • How will these long-term contracts affect China’s coal market?
    • The gaps between the long-term prices and spot prices
    • The relationship between Indonesian coal exports to China and QHD 4500kcal/kg (NAR) prices
  • Risks
  • Conclusion
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