China tells mines to raise thermal coal output

China has ordered major coal mines to raise thermal coal output by another 500,000 tonnes per day, the latest concerted effort by the government to boost supplies to its electric utilities ahead of the winter, sources said on Tuesday. In the fourth meeting with coal mining executives this month, the National Development and Reform Commission (NDRC) called on 74 major miners to increase output, unleashing another 15 million tonnes of new supply each month onto the market, two people who were briefed on the gathering said.
The latest change doubles the output increases the government has approved in recent days to 30 million tonnes, equivalent to 1-1/2 times China's average monthly imports of coal this year. Last Friday, the government partially reversed sweeping capacity cuts enforced earlier this year. Those reductions in production capacity triggered a frenzied price rally and depleted domestic stockpiles this year.
"The amount is raised again as the increase was not enough to catch up with the demand from the power generators," said Zhang Min, a coal analyst with the Sublime China Information Group and one of the sources who had spoken to the companies participating in the meeting.
Experts say the frequency of the meetings and the rapid-fire calls for output increases reflect growing panic about the unintended consequences of Beijing's efforts to cut excess coal mining and shift the country, the world's second-largest energy market, towards using cleaner, renewable sources. Australian physical coal prices, a benchmark for Asia, have risen by more than 40 percent this year, largely following China's domestic capacity cuts.
The NDRC is also considering raising the number of mines that are allowed to increase their output, although there were no details on which companies would be given permission, the sources said. The NDRC did not immediately respond to requests for comment. Stockpiles in the country's major sea-borne coal transportation hub at Qinghuangdao were at 3.3 million tonnes on Wednesday, according to a daily operations report for the port seen by Reuters.
The port's stockpiles typically are between 4.5 to 5 million tonnes for this time of year, said Zhang Xiaojin, an analyst with the brokerage firm Everbright Futures Power companies in the north east, where temperatures can drop as low as minus 40 Celsius over the winter, have started stocking up earlier than usual, said Zhou Xinyu, a salesperson based in Qinghuangdao with the Tangshan Port Group. Authorities are also concerned about deliveries of coal to power companies as trucking rates have soared and ahead of annual maintenance on the country's main coal line, analysts said. The rail line which carries coal from Datong to Qinghuangdao will undergo 15 days of annual repairs from Oct. 8. Trucking prices have surged in the past week after the Ministry of Transportation introduced new regulations on September 21 that imposed stronger penalties and ramped up inspections to prevent trucks being overloaded with goods, analysts said.