SHANGHAI, Dec. 1 (SMM) -- Steelease confirmed that the NDRC prescribed that increases in major contract thermal coal prices should be below 5% in 2012, with spot thermal coal prices (5,500 kcal/kg) at Qinhuangdao Port below RMB 800/mt.

Coal Costs at Thermal Power Plants Expected to Fall 6%

The NDRC prescribed that spot thermal coal prices (5,500 kcal/kg) at Qinhuangdao Port should be below RMB 800/mt in 2012. According to the latest thermal coal price movements in Qinghuangdao on November 28th, 2011, import prices of thermal coal (5,500 kcal/kg) were RMB 840-850/mt. Prices of thermal coal (5,500 kcal/kg) will be cut RMB 40-50/mt once the prescription takes effect, reducing at least 6% fuel costs for thermal power generation plants. That will help cut losses at those enterprises. In addition, the price limit is only effective in Northern China, while prices for coal transported by railway or highway were not adjusted. Steelease thinks that as East and South China including Zhejiang and Guangdong regions use sea transportation, any effects on Central China regions using railway or highway transportation will be limited.

Contract Coal Price Hike Ceiling Set at 5%

The NDRC suggested the ceiling for contract coal prices be 5% in 2012, changing the situation that major contract coal prices never rose in the past.

As price spread between major contract coal and market coal prices have been large for a long term, the default rate of contract reached 70%. The suggestion will secure the implementation of major coal contracts.

Coal enterprises will raise prices by RMB 27.5/mt based on contract coal prices of RMB 550/mt.