China's March coal output slumps on high stockpiles, lower demand

16th April 2024 By: Reuters

China's March coal output slumps on high stockpiles, lower demand

BEIJING - China's coal output fell 4.2% in March, statistics bureau data showed on Tuesday, as miners cut back production on lower demand from power generators and ample inventories of the fuel limited stockpiling.

China produced 399.33-million metric tons of coal last month, the National Bureau of Statistics said on Tuesday. That brought output in the first quarter of the year to 1.11-billion tons, down 4.1% compared with the same period last year.

Domestic coal prices fell in March on oversupply and weak demand from marginal consumers in the steel and cement sectors as property development lags in China. Consumption from coal-fired power plants was also lower last month amid more moderate temperatures during the Northern Hemisphere spring and a lack of cooling demand, analysts and traders said.

A string of deadly accidents forced mines in China's top coal producing province of Shanxi to halt operations earlier in the first quarter, impacting output.

Lower output in the first quarter is "largely because of safety inspections and poor demand," said Feng Dongbin, an analyst at Fenwei, a consultancy.

Feng also pointed to relatively higher inventories as a factor in miners cutting back their output. "When stockpiles reach a certain level, they can't absorb the overproduction anymore, and we've now reached that stage," he said.

Still, China's daily output recovered in March compared with the beginning of the year. Production last month was 13.3-million tons per day, up from 11.8-million tons per day during the first two months of the year.

The production of coke used in steelmaking fell 6.0% in March to 39.37-million tonnes, with year-to-date output reaching 119.89-million tonnes, down 0.5%, the NBS data showed.

Chinese coal output may continue to decline as Shanxi province officials said in a work plan last week that it plans to cut full-year output by about 4% from 2023.

That would be the first production cut in seven years for the traditional coal-producing region, which has already mined out much of its high quality reserves, spurring production to shift westward.

However, averaged out against expected production increases by some other provinces, China's total output will be about 1% higher in 2024, industry group the China Coal Transportation and Distribution Association has forecast.

While thermal coal output will rise this year, production of coking coal for steel is likely to fall because Shanxi is a major hub for mining this grade of coal, Fenwei's Feng said, driving higher imports of Mongolian coking coal in 2024.