China’s coal cuts lifting price

Planned Chinese coal production cuts are finally making an impact on price, with expectations of a 20 per cent price growth in value by the end of 2016.

Earlier this year the country announced a swathe of governmental initiatives to address oversupply in coal and iron ore.

In January it declared it would not approve any new coal mines for the next three years, in a bid to cut growing stockpiles, as well as increase its alternative energy supplies.

The country also plans to reduce national output by around 60 million tons in 2016, and around 500 million tonnes of coal over the next three to five years, with the Shanxi province slashing around 100 million tonnes of production alone by 2020.

In March China’s government then stated it would lay off close to two million workers in its coal and steel industry to help cut market oversupply.

An official at China’s human resources and social security ministry said the nation’s industries expect to cut around 1.8 million workers as it seeks to reduce capacity, and address the growing stockpiles in the country.

This plan to slash the country’s coal and steel workforce came only days after Chinese coal companies pushed the government to set a price floor for coal to protect against bankruptcy and stem job cuts.

Additionally, the government has taken further steps to reduce output, cutting operating days from 330 to 276 per year.

New data by Citigroup predicts the coal price may rise by 20 per cent on the back of these changes, according to Bloomberg, as coal production fall around nine per cent, more than offsetting the predicted 3.4 per cent decline in demand.

 

 

 

 

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.