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China’s Coal Country to Boost Output

China’s biggest coal-producing province is set to boost output in June in a bid to prop up the provincial economy after a drop in coal production earlier this year.

Production in Shanxi declined substantially in the first quarter, due to closer oversight on safety practices after a series of fatal accidents. It was down by some 25%, which affected the GDP growth of the province, Bloomberg reported, adding that Shanxi dropped to the 31st place among Chinese provinces in terms of economic growth.

The decline followed orders from state regulators to halt some production and conduct safety inspections between March and May. Shanxi produces about 29% of China’s coal, both coking and thermal.

This has in turn boosted imports of both coking coal, which China generally tends to import a lot of because of insufficient local supply, and also thermal coal, which it does produce locally in substantial volumes.

While demand for both kinds of coal remains quite strong, demand for thermal coal has recently been affected negatively by surging hydropower production, China's Coal Transportation and Distribution Association said earlier this week.

Hydropower generation in China jumped by 42.9% in the last third of April compared to the same period last year and is “very likely to maintain double-digit growth,” Reuters quoted Feng Huamin, an analyst at China Coal Transportation and Distribution Association, as saying at a market seminar on Wednesday.

This is a reversal of the situation from last year when insufficient rains and drought caused a spike in coal consumption for electricity generation because wind and solar could not shoulder the whole additional burden of demand.

Meanwhile, China has generally boosted its imports of coal so far this year, as it looks to stockpile fuel for the power plants ahead of the summer amid international prices that were half last year’s levels in the first four months of 2024.

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By Charles Kennedy for Oilprice.com

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