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China top coal firm targets 50-60 mln tonnes output cuts in 2015

China's biggest coal producer, the state-owned Shenhua Group, will cut production by 50 to 60 million tonnes this year to help tackle a massive supply glut, a company executive said on Thursday.

The Chinese government has urged coal producers to cut output to support prices, with the market struggling because of weak industrial growth and a concerted shift to cleaner forms of energy.

Last year, China drew up measures designed to stop mines exceeding their original production guidelines and flooding the market with supplies. Wang Xiaolin, Shenhua's vice-general manager, told an industry conference the firm had taken action to meet the new requirements.

"We have already completed inspections of all our mines for illegal production ... and we will cut output by 50 to 60 million tonnes compared to 2014," he said.

The Shenhua Group produced around 500 million tonnes of coal in 2014. Its listed unit, China Shenhua Energy <601088.SS>, said in February it would cut output by 10.8 percent to 273.6 million tonnes this year.

With chronic oversupply aggravated by weak downstream demand, the government promised in March to "turn around" the sector, which provides around 65 percent of the country's primary energy needs and employs 6 million people.

However, efforts to curb supply and slow the pace of imports have done little to halt the slide in prices, with benchmark Qinhuangdao coal down 13.3 percent this year after slipping 16 percent in 2014.

Wang said he hoped the industry could return to more stable, long-term supply contracts but, with the market oversupplied and prices still falling, customers naturally preferred to make use of the spot market.

Local media have reported that China could be about to slash the rate of value-added tax paid by coal producers, but dramatic new measures to help the sector are unlikely in the middle of a nationwide campaign against air pollution.

Earlier this year, Zhang Youxi, president of Datong Coal Mining Group, told a meeting of China's parliament that the government should consider setting a minimum coal price, noting that power plants were still putting pressure on mines to slash prices despite widespread industry losses. [ID:nL3N0WJ21X]

But Jin Hua, the company's vice-general manager, told the conference such a policy would be impossible now that coal prices were set by the market.

China produced 850 million tonnes of coal in the first quarter of the year, down 3.5 percent from the same period of 2014, according to state news agency Xinhua.

source: http://www.metal.com