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China state planner finalises rule to set up coal production reserve system

China’s state planner on Friday finalised a rule to set up a domestic coal production reserve system by 2027, aimed at stabilising thermal coal prices and supplies to power plants.

The rule, which was first issued in draft form by the National Development and Reform Commission (NDRC) in December, called for 300 million metric tons of “dispatchable” annual coal production by 2030, equivalent to about 6% of last year’s output.

China set a goal in 2021 to have coal reserves equivalent to 15% of annual output stocked at mines, ports, power plants and other designated storage areas.

The new system will build on that measure by ensuring that a certain amount of production capacity is ready to be mined when needed.

It will focus on mines that produce coal for electricity and heat generation – prices of which are closely monitored by authorities because of their connection to power prices and local livelihoods – rather than coking coal, which is used to make steel.

Coal mines that are part of the capacity reserve system must be able to dispatch output when authorities deem prices to have exceeded a “reasonable” range or when supplies are tight. These mines would also no longer be subject to local government requirements to sign medium- and long-term contracts with buyers.

Large scale, modern mines with good safety conditions in China’s top coal-producing regions of Shanxi, Inner Mongolia, Shaanxi and Xinjiang would be prioritised for inclusion into the coal reserve plan, according to the NDRC notice.

China is the world’s top coal consumer and producer, mining a record 4.66 billion tons last year. But the country has been concerned about energy security since a crippling domestic coal and power shortage in 2021 that prompted a probe into soaring coal prices.

Coal output is expected to stabilise this year as China ramps up renewable power and is likely to notch just 1% production growth, according to an industry group forecast.

Source: Reuters