Amid power crunch, China tells mines to boost output immediately

Chinese officials ordered more than 70 mines in Inner Mongolia to ramp up coal production by nearly 100 million tonnes as the country battles its worst power crunch and coal shortages in years. The move is the latest attempt by Chinese authorities to boost coal supply amid record-high prices and shortages of electricity that have led to power rationing across the country, crippling industrial output. The proposed increase would make up nearly 3 per cent of China's total thermal coal consumption.

In an urgent notice dated October 7th, the Inner Mongolia regional energy department asked the cities of Wuhai, Ordos and Hulunbuir, as well as Xilingol League, or prefecture, to notify 72 mines that they may operate at stipulated higher capacities immediately, provided they ensure safe production. An official with the region's energy bureau confirmed the notice but declined to say how long the production boost would be allowed to last.

The notice followed a meeting on the same day during which the regional authorities mapped out measures for winter energy supplies in response to mandates from China's State Council, or Cabinet, the state-run Inner Mongolia Daily reported on Friday. "The (government's) coal task force shall urge miners to raise output with no compromise, while the power task team shall have the generating firms guarantee meeting the winter electricity and heating demand," the newspaper said. "This demonstrates the government is serious about raising local coal production to ease the shortage," said a Beijing-based trader, who estimated the production boost may take up to two to three months to materialise.

The 72 mines listed by the Inner Mongolia energy bureau, most of which are open pits, previously had authorised annual capacity of 178.45 million tonnes. The notice proposed they increase their production capacity by 98.35 million tonnes combined, according to Reuters calculations. "It will help alleviate the coal shortage but cannot eliminate the issue," said Lara Dong, senior director with IHS Markit. "The government will still need to apply power rationing to ensure the balancing of the coal and power markets over the winter," she said. China's Zhengzhou thermal coal futures briefly slumped 6 per cent on Friday morning after opening up nearly 3 per cent. - Reuters