Coal news and updates

Coal prices continue to hold steady as the market seeks new balance following China’s crackdown on coal mining, which sent coal prices soaring after years of weakness.

 

When China moved to lower pollution this year by reducing the amount of days it allowed coal miners to operate, coal reacted with a swift price rally that caused steelmakers and utilities to beg for relief to lower costs.

 

While coal cuts occurred across the country, according to China Daily, Shanxi province, which supplies about a quarter of China’s coal, shut down or restructured 25 coal mines this year, cutting 23.25 million tons of coal production capacity. This was above the goal of reducing 20 million tons of production this year.

 

With China on target with its capacity cut goals, the country now has to be strategic in reducing its coal dependence, focusing on both demand and supply reductions to prevent another spike in prices like what was witnessed in 2016. The key is to reduce demand, not just supply, and this is a goal the country is working on, it will just take time. A great deal of China’s coal is used in electricity generation, and China is currently developing the infrastructure needed to meet an increasing amount of its energy needs from other sources of fuel, such as nuclear. Right now China is headed into its peak electricity demand period of winter and even though coal prices have recently steadied, this could mean more upside for thermal coal due to lower stocks and higher demand.

 

China previously set a goal of reducing coal capacity by about 500 million tons, from 2016 to 2020, but after coal’s recent rally the country has been pushing coal miners to increase production. While this has led to concerns that China would take back its commitment of reducing emissions, hopefully it is just a short-term trend.

Source: Economic Calender