CHINA will give power utilities more flexibility on signing long-term thermal coal supply contracts with domestic miners for 2024, as supply concerns have waned amidst surging output and imports.

China has driven coal production to a record high this year after approving dozens of new mines, in a bid to improve energy security and avert a repeat of power shortages in 2021 and 2022.

Coal-fired power plants should put at least 80% of their 2024 domestic coal consumption under term contracts, according to a document by the National Development and Reform Commission (NDRC), a lower volume compared with 2023.

Last year, the top economic planner asked utilities to secure 105% of their domestic demand from miners under term contracts, and ordered all coal miners to sign term supply contracts, aiming to stabilize the market and avoid a supply crunch.

“The principle of the NDRC requirements did not change much — the government still wants utilities to sign more term contracts with domestic miners, but a lower volume mandate will give them more room to choose suppliers based on market dynamics,” said a purchasing manager at a major domestic power generator.

Over the first 10 months of 2023, China increased coal imports by 67% year on year to 384 million metric tons, buoyed by the resumption of coal trade with Australia and robust import margins.

The NDRC maintained requirements from last year, mandating all coal miners put at least 80% of their overall output under term contracts, and reiterated monthly and quarterly supervisions on the fulfillment of contracts, the document said.

“Power plants may not want to lock in too much supply with the term contracts, as the market expects coal prices to fall further next year. No one wants to be caught defaulting on contracts,” said a coal trader.

Spot prices for thermal coal with energy content of 5,500 kilocalories in northern Chinese ports have fallen to about 920 yuan (US$126.49) per ton from about 1,200 yuan a ton in the beginning of 2023. The price fell to around 800 yuan in June.

The NDRC wants all participants to have signed the 2024 contracts before Nov. 30.

(SD-Agencies)