The overall framework of the Electricity and Coal Association did not change much in 2025, and the contract ratio is required to be lowered year by year.
The Zhitong Finance App learned that CITIC Securities released a research report saying that the China Coal Resources Network recently reported information on the work of the Electricity and Coal Association in 2025. Judging from the report, the overall tone of the 2025 CCP policy did not change much and was basically in line with expectations. There have been minor adjustments to some provisions. The changes are mainly reflected in the addition of a new index to the port mayor's agreement price formula, lowering the signing ratio of Changxie Coal, and putting forward requirements for coal quality. The above changes may further strengthen the link between port market agreement prices and spot prices, and the average sales prices of coal companies with a high share of the Changxie may increase slightly. The 2025 long-term cooperation policy may have a positive impact on coal companies with a high proportion of long-term associations.
The main views of CITIC Securities are as follows:
The overall framework of the Electricity and Coal Association did not change much in 2025, and the contract ratio is required to be lowered year by year.
According to China Coal Resources Network, the National Development and Reform Commission recently issued the “Notice on Accomplishing the Signing and Implementation of Medium- and Long-Term Electric and Coal Contracts in 2025”. Judging from factors such as contract targets, signing period requirements, and coal/power enterprise signing scale requirements, the long-term cooperation policy continues the previous framework, and most of the details have not changed much. Important changes are reflected in the addition of the China Electricity and Coal Purchase Price Index (CECI) to the Port General Cooperation Formation Mechanism, easing the share of coal companies signing coal volume contracts, and putting forward requirements for coal quality. Furthermore, the new policy removes the relevant statement from the statement encouraging power generation companies to sign 100% contracts, and the flexibility of power companies to make independent decisions may have been enhanced.
The CECI index adds to the pricing formula, or enhances the correlation between port long-term agreement prices and spot prices. The long-term agreement ratio requires lowering or increasing the average sales price of some companies.
The 2025 long-term agreement price formula still consists of a “base price+floating price”. However, in the original long-term agreement price formula, the floating price part is calculated from 3 indices, and the 2025 policy is expected to be included in the CECI index. According to the coal market network and coal resource network price data, the average price of the CECI index is about 50/60/47 yuan/ton higher than the average price of the National Coal Trading Center Composite Index (NCEI), the Bohai Rim Thermal Coal Composite Index (BSPI), and the Qinhuangdao Thermal Coal Composite Trading Price Index (CCTD) index since the beginning of the year. It is estimated that if CECI is included in the Changxie formula, it may increase the port market price by about 6 yuan/ton. At the same time, because CECI is more sensitive to spot price trends compared to other indices, the volatility of the Port Authority may increase, and the link between the port market agreement and spot price may be strengthened. However, the share of coal companies' task volume in terms of resource volume has dropped from 80% to 75%. Since the port manager's agreement price is currently about 17% lower than the market price, the easing of the ratio will help coal companies with a relatively high share of Changxie coal to increase the average price; from an industry perspective, the industry's coal supply has decreased, and market coal price fluctuations may increase.
Add “coal quality clauses”, or reduce industry transaction costs.
The new policy stipulates that “in accordance with the principle of 'high quality and high price, low quality and low price', the supply and demand parties shall clarify the coal quality deviation settlement mechanism in the contract, and encourage negotiations to determine the calorific value conversion coefficient.” Clarifying the principles on coal quality requirements at the policy level may make transactions between supply and demand more fair, slow down the game between coal and electricity, and help reduce transaction costs in the industry.
Investment Strategy:
The 2025 Changxie policy mechanism is basically in line with expectations. The general framework remains stable. The reduction in the contract ratio of the coal mine general association and the inclusion of the port mayor agreement price formula in CECI may help coal companies with a high share of Changxie coal to increase the average sales price. Companies with a high share of long-term coal in the early stages are all industry leaders.
Risk Factors:
Changes have exceeded expectations in the implementation of the Long Term Cooperation Policy; a further slowdown in macroeconomic growth has affected coal demand; and policies such as safety supervision and environmental protection have been relaxed.
