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