China plans to increase high-quality coal by allowing mines to boost capacity if they were willing to shut outdated production processes, the latest effort by authorities to further streamline the industry and stabilize coal prices.
Coal companies would be encouraged to close their inefficient and polluting mines and replace those with larger ones if they meet certain standards, the National Development and Reform Commission (NDRC) said in a statement on February 9.
Coal mining companies that agree to sign long-term contract with power plants or to set up joint venture with power companies will be allowed to expand their capacity by 130-300%.
It marked the latest of several measures by China to foster closer tie between coal mines, related firms and power utilities as it looked to stabilize coal prices.
In a recent research report, analyst with China International Capital Corporation Limited said China may have 380 million tonnes of approved replacement capacity to start operation this year, including 200 million tonnes of newly-added capacity,
In late January, four of the country's major utilities warned of tight coal supplies after thermal coal prices on the Zhengzhou Commodity Exchange hit a record of 679.8 yuan/t ($107.53/t).
Spot coal prices at ports were standing above 750 yuan/t in the past weeks.
Those currently located in natural reserves and regions with high natural disaster risk would be allowed to double their capacity if they re-locate their mines.
The NDRC would give less than a year to shut production for coal mines granted allowance to boost capacity, the statement said.
(Writing by Tammy Yang Editing by Harry Huo)
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