China’s National Development and Reform Commission (NDRC) has approved the resumption of production at some 38 open-cut coal mines whose mining operations were halted earlier because of incomplete permits of land use. The mines are all located in Ordos, North China’s Inner Mongolia, and host 66.7 million tonnes/year of raw coal capacity in July, according to a post by NDRC on July 30.
The production bans were lifted last month as part of the State Council’s efforts to ensure steady coal supplies and stabilize the country’s coal prices, the NDRC noted. As of July 30, all these coal mines – whose total output could reach 200,000 tonnes/day when operations are stabilized – were back at work and were accelerating stripping operations, it said, expecting materialized output early this month. China’s total raw coal production is around 10-11 million t/d, Mysteel Global noted.
From early 2020, investigations into illegal mining and resources development and related corruption issues in Inner Mongolia had forced many local coal miners to suspend operations, including these 38 mines. Coal production and sales in the region have also been disrupted since then, as reported.
Last year, Inner Mongolia’s raw coal output declined 7.8% on year to around 1 billion tonnes. Inner Mongolia is also one of China’s main thermal coal-mining regions but last year, it was replaced by North China’s Shanxi as the country’s largest coal mining region.
“Since early this year, market participants have been closely monitoring when the suspended coal mines in Ordos might return to operation,” said a Shanghai-based analyst. What impact the return of the mines might have on the domestic coal market and prices still needs further observation, he added.
China’s domestic thermal coal prices have skyrocketed this year, as the ramp-up of domestic production has been unable to fully meet buoyant demand for coal for all uses due to the fast recovery of economic and industrial activities, as reported.
Besides the resumption of the Inner Mongolian coal mines, NDRC also announced recently that effective until March 31 2022, it will allow coal miners to apply for capacity expansion on their qualified operations without the necessity of having to previously submit quotas to swap for the new capacity, according to another post on July 30.
China’s coal futures market reacted immediately to news of these measures. The closing price of the most-traded September thermal coal contract of the Zhengzhou Commodity Exchange, for example, plunged 6.53% from the settlement price last Friday to Yuan 865.2/tonne ($133.7/t) on Monday.
So far, the significance of this news has not impacted China’s spot coal market, however. As of Monday, Mysteel’s price assessment for the 5,500 kcal/kg Shanxi blend thermal coal at Qinhuangdao port in North China’s Hebei was unchanged on day at Yuan 1,090/t including the 13% VAT, which was also a high since Mysteel started the assessment on December 15 2008.
Source: Sean Xie and Russ McCulloch
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