Coal out­put to be hiked, says NDRC

Eco­nomic reg­u­la­tor frees part of moth­balled ca­pac­ity to rein in ex­ces­sive price in­creases

China Daily (USA) - - BUSINESS - By YANG ZIMAN yangz­i­man@ chi­

China’s top eco­nomic reg­u­la­tor— the Na­tional De­vel­op­ment and Re­form Com­mis­sion — gave the green­light to bring back on­stream some frozen coal pro­duc­tion ca­pac­ity in or­der to head off coal prices ris­ing ex­ces­sively, it an­nounced on Wednes­day.

The ca­pac­ity in­volved was pre­vi­ously taken off­line in or­der to tackle in­ef­fi­cien­cies and un­prof­itabil­ity re­lated to over­ca­pac­ity in the sec­tor.

But the com­mis­sion, at a brief­ing in Bei­jing, said it was re­leas­ing the moth­balled ca­pac­ity in a bid to tem­per coal prices, which have been in­creas­ing sharply of late due to a short sup­ply.

Coal prices have been ris­ing rapidly since Fe­bru­ary. The Bo­hai-Rim Steam-Coal Price In­dex has reached 554 yuan ($83) per met­ric ton, in­creas­ing 49.3 per­cent from 371 yuan per ton at the start of the year.

In early Septem­ber, the NDRC is­sued a con­tin­gency plan for putting a cap on fast-ris­ing coal prices, al­low­ing daily coal out­put to in­crease by 300,000 tons.

The com­mis­sion said on Wednes­day that it has made new plans to in­crease daily coal out­put by 500,000 tons.

“If coal prices keep go­ing up fast, we will un­leash more ca­pac­i­ty­toen­sureast­able­coal sup­ply,” the state­ment said.

Ac­cord­ing to a re­port in Bei­jing Busi­ness To­day, Shen­hua Group Corp has ob­tained per­mis­sion to in­crease its out­put by a max­i­mum of 2.79 mil­lion tons this year at its 14 coal mines.

The NDRC said, how­ever, that over­all it was stick­ing to its pol­icy of shed­ding over­ca­pac­ity in the sec­tor.

An­a­lysts said the com­mis­sion would bal­ance the need for re­struc­tur­ing with ris­ing de­mand as the coun­try heads into the colder win­ter months.

Deng Shun, a coal an­a­lyst at ICIS, a com­modi­ties in­for­ma­tion ser­vice provider, said in the next few months the NDRC’s em­pha­sis would be on guar­an­tee­ing coal sup­plies but it would not take its eyes off the longer-term need and its ef­forts to down­size ca­pac­ity.

“Coal-con­sum­ing com­pa­nies have been ac­tively low­er­ing their in­ven­to­ries. Yet as coal prices rise, they want to stock up on coal, only to find that the sup­ply is very short,” Deng said.

An­a­lyst Xu Xiangchun, at iron and steel con­sul­tancy web­site mys­teel, said coal sup­plies to steel smelters were cur­rently quite tight. Wang Yanfei con­trib­uted to this story.

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