China`s coal mining provinces cut output to reduce oversupply
Source: www.chinamining.org Citation: Platts Date: Jul.13, 2012
China`s major coal mining provinces, including northern China`s Shanxi and eastern China`s Shandong, have cut or have plans to cut coal output in a bid to alleviate oversupply and end persistent weakness in the domestic coal market, industry sources told Platts Thursday.
A number of Shanxi-based coal miners are said to have cut their coal output by 20-30% since May, according to a source at a big Shanxi-based coal mining and trading company.
"Our company has cut coal output by 10-20% since May," he said, adding that his company has coal stocks of about 6 million mt, compared to its current mining capacity of about 10 million mt/year.
Shandong Province will enact measures to cut local coal output with a view to stopping coal prices from slipping further in the second half of 2012, according to a release on the official website of the Shandong Provincial Economic and Information Committee.
The province had total coal stocks of over 11 million mt at the end of June, able to last for 32 days of burn at local power plants.
"Stocks at local power plants and coal ports are still too high and probably that is the reason for the planned output cuts in the second half of 2012," a Shandong-based trader said.
China`s largest coal miner Shenhua Group, however, has no plans to cut its output in the second half of 2012, a source of Shenhua Group`s corporate office told Platts Thursday.
"We are still planning to achieve a 4-5% year-on-year increase in coal output in 2012," he said. In 2011, Shenhua Group mined 400 million mt of crude coal, up 12% year-on-year.
In the first half of 2012, China`s railroads carried 1.1658 billion mt of coal, up 4.5% year-on-year.
"The year-on-year rise in coal railings indicate that China`s major coal mining provinces have not cut their output much," Mao Xiaoling, an analyst with Beijing-based Dexin Yongming Consultation.
Shaanxi Province, for example, mined 42.07 million mt of coal in June, up 14.2% year-on-year, although down 2.2% from 43.01 million mt in May, Platts reported previously.
Additionally, small coal miners and small coal mining provinces are more likely to cut their output than big ones in that the former are more vulnerable to unfavorable market conditions, Mao noted.
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