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China’s coal production is set to climb for the sixth year in a row, reaching a new record, as the Beijing government acts to ensure supplies in the top miner and consumer of the fuel, spurring further declines in prices.
Output could reach 4.4 billion tons in 2022, driven by faster capacity expansions at major mines, the official China Energy News said Wednesday. While Covid flareups have constrained mining, government efforts to guarantee winter supplies may lift output back to a daily record in the final two months of the year, boosting annual production by 8% from 2021.
The National Development and Reform Commission, the top economic planning agency, asked coal miners to lock in more long-term contracts with power generators at a meeting last week. The move is aimed at keeping prices in what the government sees is a reasonable range of 570-770 yuan ($80 to $108) per ton at the Qinhuangdao trading hub, far below international prices.
The price controls and increasing production have sent spot prices tumbling this week, squeezing traders’ profits, Li Xuegang, an analyst with the China Coal Transport and Distribution Association, said on a Wednesday webcast.
China’s top miner Shenhua Energy Co. slashed the procurement price for high-grade coal from smaller miners to close to 1,100 yuan per ton Tuesday, near to the level of spot settlements at Qinhuangdao port, based on association data.
Still, any recovery in demand is a long way off as the country’s industry is feeling the pain of a persistent property contraction and weaker-than-expected exports. Factories planning to send workers for longer New Year holiday breaks because of Covid may also drag down power consumption in coming months, Chao Yuke, another association analyst, said on the webcast.
