Coal news and updates

After forcing miners to cut coal output to reduce pollution, it appears that the Chinese government may encourage Chinese coal miners to increase metallurgical coal output following protests of Chinese steel mills about skyrocketing metallurgical coal prices.

 

In the first eight months of 2016, China’s coal output declined 10% year-over-year as the country cracked down on coal mining to lower pollution and improve the efficiency of the country’s coal industry. However, while the country’s moves have reduced mining and supply, demand has not decreased at a comparable amount and this has resulted in rallying coal prices.

 

But now, in response to the rapid increase in prices, China is moving in another direction. According to Reuters, China has asked state-owned miners to increase metallurgical coal output, and they agreed. The hope is that the increased output will help reduce prices, which have been negatively impacting domestic steel mills.

 

While this could offer a short-term solution, in the long-run, China is expected to face an uphill battle to reduce its dependence on coal, both thermal and metallurgical. Metallurgical coal will face a slew of challenges, while thermal coal production will not be able to see significant reductions until the country effectively makes a significant transition away from coal as a source of energy. This will require substitution with other sources of energy including natural gas and nuclear power, and the country will have to continue to develop the required infrastructure to accomplish this transition.

 

While China’s clampdown on coal has caused prices to rise, it has also resulted in increased imports of coal. Raising eyebrows, it appears that China is importing an increased amount of coal from North Korea, despite sanctions against the country due to its contested nuclear program. According to data, China imported 2.465 million metric tons of coal from North Korea in August, the highest on record. The August imports were 61% higher than purchases in April, the month when sanctions were supposed to be implemented. When the UN imposed tough sanctions on North Korea in March, China said it would ban imports of gold and rare earths, as well as coal.

Source:Economic Calender