China’s August coal production shows signs of recovery

Source : https://www.argusmedia.com/en/news/2141254-chinas-august-coal-production-shows-signs-of-recovery

 

China's coal production fell slightly on the year in August but recovered from July, suggesting the output recovery is on track after being hampered by a lengthy corruption probe in an important mining region and safety inspections at coal mines.

Output of all types of coal reached 325.81mn t during August, a decline of 0.1pc against the same period last year. But August output was 2.48pc up from July's 317.94mn t, according to the national bureau of statistics (NBS).

In contrast, July's production fell by nearly 5pc from June as a corruption probe that began in March restricted output in Inner Mongolia, which lost its status as China's largest coal producing province to Shanxi.

The investigations of two prominent government officials in Inner Mongolia's coal sector late last month for alleged corruption reignited concerns that the probe could be extended, although reports on the saga have receded since then.

Increasing domestic coal output to offset stricter import curbs has assumed greater importance as Chinese utilities approach the winter-restocking season, which typically starts in October. The country consumed 729.4TWh of electricity during an unusually warm August, an increase of 7.7pc on the year.

China's transition into the drier autumn season could curb strong hydropower output, which had been lifted by months of heavy rain, and bolster coal consumption. The country's thermal power generation was 509TWh in August, an increase of 6.2pc on the year, compared with a year-on-year decline in July of 0.7pc. Hydropower output for August rose by 8.9pc on the year but fell by 3.62pc from July, suggesting that receding water levels in the drier months ahead could curb hydropower availability.

Some utilities may have started their winter restocking earlier to avoid paying higher spot prices expected during scheduled maintenance on the critical coal-transporting Daqin railway during 9 October to 2 November. The maintenance is expected to reduce deliveries to the key coal transshipment port of Qinhuangdao. A recent rebound in the coal-consuming cement and glass manufacturing sectors, which is typical during the transition from September to October, has also supported coal demand.

Rising coal demand brought down stock levels at Qinhuangdao port to slightly below 5mn t yesterday from 5.08mn t a week ago. Chinese domestic coal spot prices have surged recently on perceptions of supply tightness as current Qinhuangdao stock levels are well below typical levels last year ahead of winter restocking.

Bids for NAR 5,500 kcal/kg coal were in the 577-578 yuan/t range fob north China ports against offers in the Yn580-585/t range yesterday. Argus last assessed this market at Yn578.25/t ($84.55/t) fob Qinhuangdao on 11 September, which was up by $2.91/t on the week.

By Kelvin Leong

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