According to market sources, China has stalled coal production at many of its mines recently as part of its efforts to keep mining accidents in check. The move will likely tighten the country’s domestic coal supplies, especially in the peak summer season.
Shanxi, which is China’s largest coal producing province, has started a month-long safety inspection process from 10 Jun’21, throughout its territory., As a result, majority of the coal mines have halted their operations from 11 Jun-15 Jul’21.
Yulin, a coal hub in northern Shaanxi province, has also asked all mines to halt operations between 25 Jun-2 Jul’21 whereas more than 20 mines have already stopped production from 11 Jun’21.
In Henan province, six coal mines owned by the Zhengzhaou Coal Industry Group, which has a combined production capacity of 8.25 million tonnes (mn t), and another seven mines, owned by Henan Dayou Energy, with a combined capacity of 11.4 mn t, have also halted their production.
In Inner Mongolia’s Ordos region, operations at two mines have been suspended for a fortnight.
Global coal prices may head north
After China banned Australian coal into the country, the former is already looking out for various alternate sourcing countries to fill in the supply gap. Now, with China facing domestic coal shortage, the demand for and prices of other-origin-coals such as Indonesia, Russia, South Africa and Colombia would increase further.
Despite coal supply shortage in China and rise in hydropower output and increased trans-regional power transmissions, the country’s daily coal burn surpassed 2 mn t recently and is likely to remain high in the near-term. In fact, eastern China’s Shandong province has raised a red flag over power shortage during the peak summer period of July-August on strong cooling demand.
Prices of the benchmark 5,500 NAR grade thermal coal in China is currently assessed at RMB 930/t ($141/t) whereas imported Indonesian 5,800 GAR is currently available at $94/t. The South African 5,500 NAR is at $90/t, and the Russian 6,000 NAR is at $119/t, making them still a cheaper option against domestic coal in China. All the imported coal prices are on FoB basis.
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