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China considering scrapping annual coal contracts

ACCORDING to a Reuters report, China's top economic planning agency has submitted a plan to scrap...

Noel Dyson

It could herald a step towards liberalisation of the Chinese domestic coal market and trigger an increase in imports because domestic prices would no longer be artificially suppressed.

The news wire reports the National Development and Reform Commission has submitted the plan to China’s cabinet the State Council.

It cites two trading sources briefed on the matter as saying approval of the plan is expected to come within weeks.

“They will need to approve it before we start the annual contract conference, which is normally held in early December,” one of those sources said.

“The main aim is to open up the coal market and it is now a good time to do so because spot prices have fallen sharply and are converging with term prices.”

Coal price contracts are set each year at an annual meeting organised by the China Coal Association and the NDRC.

At the meeting coal suppliers agree to sell certain quantities to power companies at prices set far below the market rates.

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