China is capping coal production to support prices, top miner and analysts say
BEIJING - China has placed curbs on coal production following an unexpected supply increase in the first half of the year that weighed on prices, according to an official of a major mining firm and analysts.
China's output in July dipped to the lowest level in over a year. It had risen more than 5% year-on-year in the first half, sending prices in some parts of the country down nearly 30% year-on-year by the end of June.
Analysts said the country ramped up inspections in July to ensure plants kept to approved production capacity.
"The increase (in supply) has exceeded expectations and that has led to prices falling," an official from China Coal Energy, China's third-largest coal miner, told analysts on Monday.
"So we have seen regulations regarding production and limitations on production imposed."
Shanghai-based commodities consultancy, Mysteel, said on Wednesday that among 153 coking coal mines surveyed in Shanxi, 54 mines with total production capacity of 61.1 million metric tons per year have suspended, or are cutting back, production.
Shanxi is China's top-coal producing province.
Mysteel cited China's "anti-involution" campaign and inspections across multiple provinces.
"Involution" describes supposedly unsustainable competition among Chinese firms. "Anti-involution" has become a slogan for reducingindustrialovercapacity.
When prices fall below cost level, mines cut back on investments and upgrades, leading to safety concerns, Galaxy Futures analysts said on Thursday.
State planner, the National Development and Reform Commission, and the energy regulator did not immediately respond to questions.
More recently, regulators are restricting production out of concerns that an accident would look bad ahead of a September 3 military parade marking the end of World War Two, analysts say.
On Wednesday, the 5 million ton per year Wanbolin mine in Shanxi's Taiyuan was closed for safety reasons, Mysteel said.
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