China's Coal Companies Refuse to Comment on Overcapacity Seminar; Production Cuts Still Unconfirmed
Yicai Global
/SOURCE : Yicai
China's Coal Companies Refuse to Comment on Overcapacity Seminar; Production Cuts Still Unconfirmed

(Yicai Global) Feb. 23 -- Over a dozen major coal companies refused to comment on a seminar held by the China Coal Industry Association to discuss the sector's overcapacity two days ago.

As the industry begins its recovery, coal producers find themselves in a tug-of-war regarding production while outsiders try to sneak a peek at expectations for coal prices this year.

The Bohai-rim steam coal price index, which is seen as the benchmark of China's coal market, has continued downwards after peaking in October. Both China Shenhua Energy Co. [SHA:601088]and China Coal Energy Co. [SHA:601898] support the production restriction policy which would see the maximum number of working days for coal makers drop from 330 to 276 days per year.

The restrictions, which are still pending approval from the National Development and Reform Commission, will allow for three types of companies to be exempt from the new rule: coal mines with advanced technology, mines in provinces suffering a coal shortage, and coking and fat coal mines.

"There has been a struggle between regulators and the market," an industry expert said. "The government shouldn't regulate too aggressively, although it does need to fulfil its regulatory duties. The 276-day system may be gradually replaced by a more flexible approach where the number of days can be adjusted within the 276 to 330-day range."

The NDRC has not announced the overcapacity reduction target for the coal industry this year, but several market participants said the target would be lower than last year's.

It would be more difficult to reduce overcapacity this year, Jiang Zhimin, vice chairman of China Coal Industry Association said previously. "In 2016, some of the coal mines required to cut production were already suspended or partially suspended from production, making it easier to hit the target," he said.

"This year, however, most coal mines that will be affected by the cuts are still in normal operation, and the number of workers needing to find new work will likely be more than last year."

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