(Repeats Thursday story with no changes)
* Coal mines hope prices stay strong as output slow to rise
* Miners agree some fixed-price deals with utilities for
* But keeping most 2017 output available for spot market
* Spot prices already down from highs, highlighting strategy
* Analysts say Q4 2016 marked peak for prices
By Meng Meng and Josephine Mason
BEIJING, Jan 5 China's top coal miners have
mostly resisted pressure from Beijing to sign long-term
fixed-price deals this year, in a bet that there's more money to
be made in the spot market before government efforts to ease a
supply crunch take effect.
Miners including two of the nation's largest, China Coal
and Shenhua, have signed deals with
utilities, the top consumers of thermal coal, for only about 40
percent of their 2017 output at discounts to the spot market,
according to four sources familiar with the contracts.
Getting miners to agree fixed-price deals - a break with
their usual practice - was a major part of the government's
months-long scramble to avert a winter energy crisis and protect
power companies' profits from runaway thermal coal prices.
Electricity companies pushed for more such deals, but the
miners, which sometimes assign as much as 60 percent of their
output to the utilities but at variable prices, dug in their
"Utilities would love to sign more long-term contracts
because the price is cheaper, whereas Shenhua wants to cut the
share on contract," said a purchasing manager with one of the
top utilities, China Resources Power Holdings Co., who
declined to be named due to company policy.
Initially, Shenhua asked some coal-fired power companies to
agree to as little as 30 percent of their annual tonnage on
fixed-price terms, he said.
The supply crisis and soaring prices were largely a problem
of Beijing's own making after it closed mines and limited output
earlier in the year as part of its drive to tackle overcapacity
and inefficiency in state-owned heavy industry.
The effects were felt across the world, as China is the
world's largest consumer and importer of coal, with spot prices
in Australia, the Pacific benchmark, doubling in
just four months to $120 per tonne by mid-November, their
highest in 2-1/2 years.
In China, domestic physical prices shot to 607 yuan ($88.30)
per tonne in the first week of November, up from around 400 yuan
The government's reversal of policy to let miners re-open
mothballed capacity and the securing of some fixed-price deals
have helped bring spot prices down 20 percent since then, but
they remain high by historical standards.
When the first fixed-price contracts were sealed in early
November, they were at around 585 yuan per tonne, two traders
and a miner said, a 100-yuan discount to the futures and
ChinaCoal and Shenhua declined to comment.
But miners have kept a lot of tonnage available for sale at
spot prices because they hope prices will either rise again or
at least stay strong for longer, as it takes time for production
to pick up.
China's Coal Association has said the miners are struggling
to ramp up output quickly because they have to rehire staff and
comply with stiffer safety standards.
"They believe the forward curve coupled with the price
negotiated during the last negotiation is undervalued versus
their opportunities in the spot market," said Patrick Markey,
managing director of commodity advisory Sierra Vista Resources
Nearby domestic futures prices are around 600
yuan/tonne, but they slip to around 488 yuan by July,
which suggests the market thinks the miners, who have only just
returned to profit after a few lean years, are taking quite a
China Coal Energy Co Ltd returned to
profitability in the second quarter with its best quarterly
earnings in three years, while China Shenhua Energy Co Ltd
reported its best quarterly profit since the final
quarter of 2014.
If the miners have misjudged, however, it could be welcome
news to the utilities, many of which are unprofitable above 600
yuan/tonne. CR Power Group's breakeven in Jiangsu province is as
high as 685 yuan/tonne, but in Inner Mongolia it is as low as
BMI Research analysts believe the fourth quarter of 2016 was
the peak, as domestic output increases after falling 10 percent
in the first half.
It forecasts prices from Australia's Newcastle port will be
around $60-70 per tonne for 2017, down from four-year highs
above $100 in November.
Demand growth from utilities is also likely to stagnate this
year as Beijing resumes its drive for a more efficient state
sector and shifts towards cleaner, renewable power sources, the
($1 = 6.8742 Chinese yuan)
(Additional reporting by Muyu Xu; Editing by Will Waterman)