Coal news and updates

China’s efforts to overhaul its coal industry to reduce overcapacity after years of expansion and curb pollution are reverberating through global markets from steel to freight.

What’s happening?

Output has fallen more than 10 percent so far this year as government of President Xi Jinping ordered miners to lower output to the equivalent of 276 days of production, down from 330 days. China has also cut about 150 million metric tons of capacity by the end of August -- equivalent to almost the entire thermal coal exports last year from Colombia and South Africa. China is aiming to chop about 500 million tons by 2020.

Why does China matter?

China is the biggest producer and consumer. Its output of 3.75 billion tons in 2014 -- more than the combined production of the U.S., India, Australia and Indonesia -- helps feed the world’s largest steel industry and fuel about 70 percent of the power needs of the world’s largest energy consumer.

China’s main impact on the global market comes from its imports, which accounted for about 19 percent of global seaborne trade last year, according to Bloomberg calculations and Morgan Stanley data. Production cuts have spurred overseas purchases to the highest since 2014 and are up more than 12 percent over the first eight months of this year, partially reversing a two-year slump after peaking in 2013.

What’s happened to coal prices?

After falling for five years and dropping to the lowest since at least 2008 in April, Newcastle thermal coal prices, an Asian benchmark, are are up more than 40 percent this year to about $72 a ton. Spot prices for metallurgical coal, used to make steel, more than doubled since July to over $200 a metric ton, this year’s best-performing commodity. Thermal coal in Indonesia, the world’s biggest exporter of the fuel for electricity generation, has posted the longest run of gains since 2013.

SOurce: Bloomberg.com