(Yicai Global) March 8 -- The supply-demand relationship has already significantly improved in the coal market, so China won't need to cut coal production so heavily this year, China's top economic planner and price setter said.
The fundamental principle for measures to reduce coal mining is that they need to help stabilize coal supply, keep coal prices reasonable, ensure workers have sufficient time to rest and allow more time for maintenance and safety operations, the National Development Reform Commission said online yesterday.
The overcapacity issue is being handled well, and a large number of obsolete, low-efficiency mines have been shut. As a result, illegal coal mine construction and overproduction have been effectively curbed and the supply-demand situation is improving, it added, saying there is no need to cut coal production so extensively this year.
Post-heating season policies are under discussion, the NDRC said. It has preliminarily concluded that no production restrictions will be imposed on advanced coal mines and makers of coal products in short supply. Local provincial-level governments will decide whether or not measures should be implemented in regions that rely on external coal supplies, which were strongly affected by the coal shortage.
The central government will not set any mandatory requirements, leaving regulators to decide if production cuts should be put in place on non-advanced coal mines in other regions. Measures will not be introduced if coal prices remain within a reasonable range.
Despite the production cuts and better balancing of supply and demand, the NDRC said that overcapacity has not been completely eliminated. After the heating period ends in mid-march, water supplies diverted from the south and hydropower generation will increase, and production will be resumed at coalmines after the Chinese New Year holidays. Coal demand will decline, and so will coal prices, the commission said, so there will be no steep rises in price.
Recently, many major coal miners backed the production cuts, which reduced the number of operating days from 330 a year to 276, but power companies opposed the plans and it fell into a deadlock.