China to introduce policies soon to cut coal output this year

 

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Reuters reported that China will introduce policies soon to cut coal output this year, tackling a supply glut that has hurt mining companies.

Citing a proposal submitted by the coal association, Mr Wangyi Caijin said the plans under consideration include having miners register their monthly production, authorities to step up checks on output and safety, and increased fines on firms that are producing above their approved capacity.

Mr Wang Xianzheng, China Coal Industry Association, chairman, said that the association has been working with the country's economic planner, the National Development and Reform Commission, and the National Energy Administration to draw up plans to support the industry and enforce production cuts.

The association said that more than 70% of China's coal firms are making losses, with prices eroded by falling demand growth, the supply glut and a war on smog. The problems facing the sector are expected to get worse as a raft of new capacity comes online in the coming year.

The association is aiming for a production cut of at least 10% this year, citing the proposal that has been submitted to the state council.

China produced 3.7 billion tonnes of coal in 2013.

Mr Wang said that he hopes the measures will help support coal prices at between CNY 550 tonn to CNY 660 tonne for coal with heating value of 5,500 kcal/kg to help producers pull through these tough times.

China's benchmark thermal coal prices have been steadily falling since the start of the year and are now hovering at their lowest in more than six years.

According to data from the China Coal Transport and Distribution Association, spot coal with an energy value of 5,500 kcal/kg dropped to an average of 498 yuan a tonne this week, the lowest since December 2007.

Source - Reuters

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