- Capacity utilisation declines amid stricter mining regulations
- Some mines ordered to shorten this year’s statutory working days
Mysteel Global: Rumours of tighter safety regulations in China’s largest mining hub, Shanxi province, have jittered market players recently, fuelling concerns over a sharp tumble in domestic coking coal supply. However, Mysteel’s survey shows safety checks were only blamed for one-fourth of the current capacity halts, though the inspection indeed escalated.
Mine accident in Shanxi
On 26 August, a roof collapse accident at Du’erping Coal Mine — a large state-run mine located in Shanxi’s Lvliang city and operated by Xishan Coal Electricity Co., Ltd. — left two workers missing and sparked market chatter that all coal mines in Lvliang with past accidents will be ordered to suspend operations. Mysteel confirmed this rumour was untrue.
Still on 27 August, a large 5 million tonnes (mnt)/year (mnt/y) coal mine in Taiyuan, the capital city of Shanxi, stopped production as required by local authorities due to safety violations, underscoring coal production disruptions from safety checks despite limited scope.
According to Mysteel’s survey of the 153 coking coal mines in Shanxi, 54 mines have reduced or halted operations so far, idling a combined capacity of 61.1 mnt/y or 34.7% of the total. The prime reason behind these halts was mining glitches, affecting 33 mines with a combined capacity of 27.4 mnt/y, while 8 mines with 13.7 mnt/y capacity stopped production for safety reasons.
Intensity of safety checks varies
Coal production in Linfen in southern Shanxi was the hardest hit by safety inspections, with eight local mines totalling 12.8 mnt/y ordered to halt or reduce output for 4-10 days.
By contrast, most surveyed mines in Lvliang, Changzhi and Jinzhong — other coal-producing cities in Shanxi — said they did not receive any official notices for output cuts, though there were some self-arranged mining stoppages due to mining issues.
Impact of 276-workday policy
Some mines operated by Huozhou Coal Electricity Company, a subsidiary of China’s top state-run coking coal producer Shanxi Coking Coal Group, were mandated in early August to shorten their statutory working days to 276 days this year from the normal 330 days.
Mysteel observed that there are no signs of a wider implementation of this policy so far. Besides, the overproduction investigations in China’s eight major coal-producing provinces and regions are also showing subdued influences. Survey results show that only three coal mines in Shanxi’s Changzhi voluntarily scaled back their production after the investigation, with capacities combined at 4.5 mnt/y.
Near-term outlook on Shanxi’s coal supply
Coking coal production in Shanxi is still expected to shrink further in the following week, as some mines may slow down their operations to ensure safety. For example, a state-run coal producer in Taiyuan has instructed its subsidiary mines to prioritise safety over production, which will guide these mines to stop production after their daily output goals are completed.
Meanwhile, some mines in Jinzhong city plan to shut operations for 3-5 days around 3 September, while similar halts for 1-2 days were also heard from some mines in Linfen city, Mysteel learnt.
During 21-27 August, the average capacity utilisation rate of the 523 Chinese coking coal mines that Mysteel surveys decreased to 84.04% from a week prior’s 85.21%, while their daily output of raw coal also declined 1.4% w-o-w to 1.89 mnt.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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