China Eyes Extension to Limit Thermal Coal Prices Next Year

The Chinese authorities are imposing stricter rules when it comes to contracts of the suppliers as part of the oil use expansion. The country eyes extending the limit on thermal coal prices in 2023, according to Bloomberg's latest report.

Price Caps Set For Thermal Coal Suppliers

China's National Development and Reform Commission, the agency responsible for reviewing and approving investment projects related to energy and the like, will set a fixed rule for the contracts after 2022.

The regulating body has set 675 yuan or $92.85 as the benchmark for the yearly contract for the companies. Bloomberg notes that this would be effective by Nov. 25.

This means that price caps for fuel cargoes will keep on changing amid huge economic adjustments. This will also affect the transportation and product costs of the companies.

Speaking of the price cap, the China Electricity Council says that the new price cap is based on the previous long-term contracts, which hit about 570 yuan to 770 yuan per ton.

As of Oct. 28, the organization concludes that there's an 86% increase in domestic spot-traded prices. It spiked to 1,603 yuan ($220).

Meanwhile, Newcastle coal futures hit a month-high $465 per ton last month. On Tuesday, Nov. 1, it managed to reach $361 per ton.

China's Way of Handing Fuel Price Hikes

Over the past years, China's regulation on clamping down price controls on fuel has been effective despite the increase in oil prices in the world market.

The country has been consistent in maintaining its price controls so it could stay away from the worst possible thing that might deteriorate the energy market.

Bloomberg reports that coal producers still take advantage of these efforts by posting bumper profits.

The same report also notes that at least 80% of the output from coal miners is now ready to be sold under contracts. These will be prioritized compared to their industrial counterparts, per NDRC's revised policy.

It should be noted that the country is experiencing a surge in electricity consumption. This is one of the concerns that continuously bugs the users in the country.

Sufficient oil supplies are hard to achieve, but it is still viable given China's struggle in the past months.

Although the severe drought left a painful remark on the economy, China maintained its composure to face the disruptions. The same event also triggered several tech companies to pause their operations in the meantime.

Fuel Embargo

Outside China, Europe is about to implement a wide ban on refined oil products from Russia. Ahead of the punishment, this would mean that there would be a limit on the fuel stocks in the continent.

According to Oilprice.com, the upcoming winter season is expected to be prompted by concerns about "tighter fuel markets."

Despite this adjustment, the experts believe that the higher fuel exports in China will not have a big impact on the diesel suppliers in the US and Europe.

This article is owned by Tech Times

Written by Joseph Henry