China's NDRC hikes benchmark price for long-term contract for 2022 by 31%

China's top planning body National Development and Reform Commission said Dec. 3 that the benchmark price for long-term contract of 5,500 kcal/kg NAR thermal coal should be Yuan 700/mt ($109.89/mt) for next year, a 31% increase from Yuan 535 in 2021, according to a note seen by S&P Global Platts.

The NDRC gave its opinion at the National Coal Trade Fair where the long-term contract signing and performance plan for 2022 was discussed.

The NDRC said that power generation and heating companies must sign long-term contracts for 100% of coal consumption except for imported coal.

It said that the mechanism of floating price along with a base price should remain unchanged but will be adjusted monthly. It said that the adjustment range of 5,500 kcal thermal coal is between Yuan 550-Yuan 850.

A China-based trader said that this would be a good news for Indonesian producers as their production costs are lower than the benchmark. The trader added that this could put pressure on coal prices in the spot market but miners negotiating long-term contracts may be relieved.

This year NDRC has repeatedly intervened in the coal market to normalize surging prices by imposing price caps and boosting production domestically.

The prices of Indonesian coal surged this year due to the increase in demand from China and tight supply as rains and the pandemic hampered production.

The price of 5,000 kcal/kg GAR Indonesian coal was assessed at $104/mt FOB on Dec. 2 as against $66.5/mt on Jan. 4, according to Platts data.

The price of 5,500 kcal/kg NAR Chinese domestic coal was said to be around Yuan 1,250/mt on Dec. 2 compared to Yuan 800/mt on Jan. 4, according to sources.

An Indonesia-based producer said that the increase in benchmark price was a positive news as it gave more upside room to thermal coal prices for 2022 in comparison to 2021 even if there is a correction.