'China's output curbs will hold up coal prices'

Published on 2016-12-01

One of China's biggest state-owned coal companies says prices will remain "relatively high" next year as the central government remains committed to shutting down old, inefficient mines.

Yanzhou Coal Mining Group director and chief financial officer, Zhao Qingchun, told the Australian Financial Review the government was "determined to remove outdated capacity", and strengthen regulations on the transportation of domestic coal.These two commitments, he said, would underpin global coal prices.

Mr Zhao's comments come despite the government decision earlier this month to increase mines' operating days so there will be enough coal for heating in winter.
After what Mr Zhao describes as a "bearish" first half, the thermal coal price has risen sharply since August. This should have helped Yanzhou Coal Mining Group's Australian subsidiary, Yancoal, to return a profit in the fourth quarter after a difficult few years. He also said the company was looking for more acquisitions, but declined to comment on specific deals.

"As a developing coal mining company we are certainly interested in Australian assets," he said in an interview in the mining town of Zoucheng, home to Yanzhou's corporate headquarters. "We will choose the right time to look at the projects which suit our development strategy."

High-quality Australian thermal coal, which is the benchmark for Asia, doubled in price between April and November, to almost US$110 a tonne after production curbs in China had a bigger impact than expected.

In the past few week prices have dropped back as China reversed some of those production restrictions to ensure enough thermal coal was available during winter. The country is bracing for one of its coldest ever starts to winter.

While China's overall consumption of coal is down so far this year, the impact of moves to restrict supply, as well as a drop in hydro electricity production due to a lack of rain, has boosted demand for imports and driven up prices.As a result, many of China's coal miners are returning to profitability.