China Moves to Stabilize Long-Term Coal Supply and Prices

China’s top economic planning body has finalized plans to create a reserve system for coal production by 2027 to avoid new shortages and ensure stable supply and prices.     

China aims to have 300 million metric tons of annual “dispatchable” coal production by 2030, according to the plan from the National Development and Reform Commission (NDRC).  

In 2021, when China was hit by blackouts, the world’s second-largest economy set a goal to have coal reserves stocked at mines, power plants, and ports equivalent to 15% of its annual production.

Now China is looking to set up a new coal reserve system to have spare coal production capacity, with coal ready to be mined when and if needed.

The coal mines that will be included in the capacity reserve system should be ready to send coal supply whenever authorities consider the domestic market is tight or prices move above a “reasonable” range, according to a notice of the planning body cited by Reuters. 

Big and modern mines in the biggest coal-producing areas in Shanxi, Inner Mongolia, and Xinjiang with good track records of safety will be first in line to be included in the new coal reserve plan, the Chinese state planner says. 

The creation of a coal reserve system will aim to ensure enough coal supply during peak power demand periods or in extreme weather conditions. It is also viewed as a way to stabilize coal prices in tighter market conditions.  

So far this year, coal output in China has wobbled after authorities in the northern province of Shanxi, the top coal-producing region, ordered in February miners to reduce production and carry out safety inspections between March and May, following several fatal incidents at mines in China in recent months.

In January and February 2024, total Chinese coal production declined by 4% compared to the same period of 2023.

Weaker coal prices and demand and mine closures due to safety checks are set to reduce coal output in the Shanxi province by 4% this year, for the first time in seven years, according to a plan announced by the provincial government.  

By Tsvetana Paraskova for Oilprice.com

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