China's coal market may see soon see stabilized prices. That's thanks to a long-term agreement reached between major producers and users on Wednesday.

The National Development and Reform Commission says China's largest coking coal producer --Shanxi coking coal -- signed one-year contracts with six state steel plants. Coal prices have been volatile in China recently. Prices continued to drop this week as producers raised output for the winter season.

The Bohai-Rim Steam-Coal Price Index is a key gauge of coal prices in northern China's major ports. And it fell 0.5 percent from a week ago to 601 yuan per ton. That was the index's third straight weekly decline after 18 weeks of rising prices due to cold weather and overcapacity cuts.

Chinese authorities say there is no basis for the coal price rally and hope the deal would be an example for the coal industry to ease price swings. 

"The signing of the long-term contracts marks the integration with international commodity markets. Also this sends a positive and sensible signal to the market," said Lian Weiliang, Vice Minister, National Development and Reform Commission.

"The signing will improve the current coal market order, and encourage other coal producers to sign long-term contracts soon. The benchmark price is still 600 yuan per ton less than global prices, but it fully reflects the coal production costs and end consumers' ability to pay."