China said to be eyeing resuming coal output restrictions

China, the world’s biggest producer and consumer of coal, is considering reinstating output restrictions to avoid the return of a glut after easing limits during winter. Shares in the country’s coal mines jumped along with futures prices.

The National Development and Reform Commission may resume mining curbs that cap output to an equivalent of 276 days of capacity after heating season ends in mid-March, according to people with knowledge of the matter, who asked not to be identified because the information isn’t public. The NDRC, the nation’s top planner, didn’t respond to a faxed request for comment and nobody answered calls to its press office.

Mining restrictions last year by President Xi Jinping’s government aimed at easing a glut resulted in a 9.4 percent drop in production and a surge in prices, snapping at least four years of declines across Asia. To cool the market, officials reversed some measures to increase production ahead of winter. A resumption of restrictions now may support prices again if demand growth is sustained, according to Argonaut Securities (Asia) Ltd.

“The policy will effectively set a floor for coal prices,” said Helen Lau, a Hong Kong-based analyst at Argonaut. “Reinforcing the 276-working-day restriction, even partially, will have an immediate impact to supply recovery and market sentiment.”

The NDRC is considering reinstating the production limits for 6 months, with some mines and areas possibly excluded, said the information source. No decision had been made yet, he said.

Thermal coal futures traded on the Zhengzhou Commodity Exchange reversed earlier losses and added 0.7 percent, to close at $78.03 a ton. Coking coal futures in Dalian fell 0.9 percent, to settle at $177 a ton after earlier rising as much as 0.5 percent.

“The NDRC probably expects a decline in coal demand as the winter heating season ends and so they are attempting to limit supplies so a new glut doesn’t emerge and knock down prices,” said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong, “The policy is likely flexible and NDRC may change it again according to supply and demand.”

The NDRC wants coal prices in a range of $72.90 to $83.11 a ton, according to Yu.