China’s Drive for Record Coal Output Spurs Yet Another Deadly Accident

Article content

(Bloomberg) — The human toll of ever-increasing coal production in China is once again to the fore after thirteen were killed in a mine accident just days after the government said it will start a three-year campaign to ensure safety.

Three people are still missing after a gas outburst at a mine run by a unit of Pingdingshan Tianan Coal Mining Co. in the central province of Henan on Friday, according to a release from the company on Sunday. Managers at the mine were taken into police custody and the authorities have ordered other operations in the area to halt production for safety checks, the local government said in another statement. 

Article content

Article content

China’s coal output continues to set records as Beijing has moved to ensure that seasonal peaks in demand are covered and blackouts avoided after the economy-crippling outages of recent years. That’s kept supplies ample and prices low, but success has come at a cost. 

Miners have been unable to raise production without incurring accidents, and the latest incident is likely to curtail output in the first few months of this year. The Henan disaster continues a horrible run that’s included 23 deaths at two mines in Heilongjiang in the last two months. Another 26 died at a fire in a miner’s building in Shanxi province in November, while a fire at a mine in Guizhou killed 16 in September. 

In February, a landslide at an open-pit mine in Inner Mongolia left 53 dead, the nation’s deadliest industrial disaster since 2019. 

More miners are expected to opt for slower production heading into the Lunar New Year after the incident, Cinda Securities Co. said in a note. The output cuts will mainly affect metallurgical coal used by the steel industry, it said, although rising temperatures and the seasonal lull in steel production should limit the impact on coal prices broadly.

Article content

Article content

Pingdingshan Tianan is the listed arm of China Pingmei Shenma Holding Group, the biggest met coal supplier in central China, according to a report by the Securities Times. The firm invested 7 billion yuan ($976 million) in improving safety controls after being fined 240 million yuan for violations over the past three years, the report said.

Pingdingshan fell as much as 5.5% in Shanghai, while coking coal futures in Dalian rose as much as 1.8%.

The Pingdingshan mine has an annual capacity of 1.5 million tons, according to Morgan Stanley analyst Sarah Chan. Together with the incidents in Shanxi and Heilongjiang, the bank expects further restrictions on output nationwide and “safety inspections to remain a key focus in coal-producing regions through March at least.” 

Morgan Stanley said 12 million tons of capacity has been taken offline in Shanxi, the top coal producing province, since November. It said steady demand from the steel industry should support met coal prices in the first half of the year. 

“Coupled with elevated steel output, we see near-term upside to China met coal prices given the tight inventory level in the supply chain,” the bank said in a note on Sunday.

Article content

The Week’s Diary

(All times Beijing unless noted.)

Monday, Jan. 15:

• China sets monthly medium-term lending rate, 09:20

Tuesday, Jan. 16:

• First contract expiry for Guangzhou lithium futures

Wednesday, Jan. 17:

• China’s new home prices for December, 09:30
• China industrial output for December, including steel & aluminum; coal, gas & power generation; and crude oil & refining. 10:00
  • Retail sales, fixed assets investment, property investment, residential sales, jobless rate
    • 4Q GDP
    • 4Q pork output and inventory levels
• Greenpeace seminar in Beijing on China’s overseas clean energy investments, 14:00
• CCTD’s weekly online briefing on Chinese coal, 15:00

Thursday, Jan. 18:

• China’s 2nd batch of December trade data, including agricultural imports; LNG & pipeline gas imports; oil products trade breakdown; alumina, copper and rare-earth product exports; bauxite, steel & aluminum product imports

Friday, Jan. 19:

• China December output data for base metals and oil products
• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30

Article content

Saturday, Jan. 20

• China’s 3rd batch of December trade data, including country breakdowns for energy and commodities

On the Wire

China’s central bank held a key interest rate steady on Monday while still pumping more cash into the financial system, bucking expectations that it would cut borrowing costs to support the economy. 

As the US and UK launch airstrikes to stop Iran-backed Houthi rebels from attacking ships in the Red Sea, China again finds itself happily sitting on the sidelines.

China’s lower-than-expected December credit, especially the slowdown in corporate financing, is another sign activity is weakening, according to Bloomberg Economics.

BYD has held talks about a potential takeover of a lithium producer in Brazil, the Financial Times reported.

—With assistance from Kathy Chen and Dan Murtaugh.

Article content