27 Oct 2020

China’s Ordos County Curbs Coal Output Capacity

27 Oct 2020  by Kelvin Leong   

Coal production in Ordos county in Inner Mongolia, one of China's most important mining districts, will not be allowed to exceed permitted levels, local authorities have warned - despite rising seasonal winter demand pressuring an already tightly supplied domestic market.

No specific reason was given for the decision by the Inner Mongolian branch of the national energy administration (NEA) to restrict production levels, although it could be the result of heightened precautions following a series of fatal mining accidents.

All coal mines in Zuoquan county in China's largest coal producing province, Shanxi, have been temporarily closed following a mining accident on 20 October that left at least four workers dead. This comes after another mining accident on 27 September in southwest China killed 16 workers.

It is unclear if the output restrictions in Ordos will be extended throughout Inner Mongolia. The province's daily output of all types of coal rose by over 60pc during 2-18 October, an official from the Inner Mongolian branch of the NEA said last week. The output increase may have been caused by the release of pent-up capacity that had been held back by a lengthy corruption probe centred on the province's coal sector, as well as the reopening of some mines.

China's coal consumption is rising on increased heating demand with the onset of lower temperatures in many parts of north China. Power loads in the five southern provinces of Guangdong, Guangxi, Yunnan, Guizhou and Hainan could rise by 7pc year on year this winter and parts of these regions could face tight electricity supply, according to state-owned utility China Southern Power Grid.

Coal stockpiles at China's main coal transshipment hub of Qinhuangdao port fell by 50,000t on the week to 5.01mn t yesterday, as utilities' winter restocking of domestic coal intensifies amid restrictions on imports.

Argus last assessed Chinese domestic prices for NAR 5,500 kcal/kg coal at 600.67 yuan/t fob Qinhuangdao port on 23 October, down by Yn7.75/t on the week. In dollar terms, the price declined by $1.14/t on the week to $88.20/t fob. But the start of the heating season from mid-November and an increase in power consumption from south China because of an economic recovery following the Covid-19 outbreak earlier this year could support prices in the coming weeks.

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