China Coal Hub Suspends Mines After Floods During Energy Crisis

During the National Day holiday, Shanxi was hit by heavy rainfall: the largest flood peak in 40 years, the suspension of railroad tracks, the transfer of tens of thousands of people overnight, the suspension of production of 27 coal mines and 99 non-coal mines…

In the context of the current thermal coal market, which is already tight in supply and demand, more than 20 coal mines in Shanxi Province have been closed due to flood control needs, triggering concerns that the thermal coal market will have a larger gap after the holiday.

According to the latest research report of Guotai Junan Securities, the global energy shortage is a foregone conclusion, coal prices are still expected to rise more than expected in October, and the gap of thermal coal in the dynamic peak season will be further enlarged.

At the same time, on the evening of October 7th, an emergency notice from Inner Mongolia on accelerating the release of some coal mine capacity circulated on the Internet. This morning, the hot coal stocks and power stocks collapsed.

The largest flood peak in 40 years, the suspension of railroad tracks, tens of thousands of people were transferred, 126 mines were closed!

Following the heavy rains in Henan, Shanxi suffered heavy rainfall.

According to news from China Weather Network on October 7th, during the National Day holiday this year, Shanxi was hit by heavy rainfall. Among the 117 counties (cities, districts) in the province, 18 counties (cities, districts) had precipitation exceeding 200 mm, and precipitation in many places broke. Record in early October. Data shows that from 20:00 on the 2nd to 20:00 on the 6th, most areas of Taiyuan, Yangquan, Linfen, Changzhi, Lvliang, and Jinzhong set a record of accumulated rainfall in the first ten days of October. Heavy rainfall has caused waterlogging, geological disasters, floods and other disasters in many places. Shanxi Province has launched a level III emergency response to geological disasters.

*** Affected by the heavy rain, as of 8 o’clock on October 4, Shanxi had transferred a total of 10,704 people, suspended production of 27 coal mines, 99 non-coal mines, 7 hazardous chemical enterprises, suspended construction of 231 projects in progress, and closed 74 scenic spots.***

Shanxi has regained its status as the largest coal-producing province

Increased pressure on coal supply under heavy rainfall

Since the end of August, power supply shortages have occurred in many parts of the country, and power restrictions and production restrictions have also occurred from time to time. As the main force of domestic power supply, coal-fired power generation is limited due to the tight coal supply and demand and restrictions on thermal coal prices repeatedly hitting historical highs.

In the context of the current thermal coal market, which is already tight in supply and demand, more than 20 coal mines in Shanxi Province have been closed due to flood control needs, triggering concerns that the thermal coal market will have a larger gap after the holiday.

Shanxi Province is the largest coal-producing province in China, with over 600 coal mines announced in the province. In the “Announcement on the Production Capacity of the Province’s Production Coal Mines” published by the Shanxi Provincial Energy Bureau on September 6, a total of 682 coal mines are listed, including some coal mines that have been cancelled (recoverable), with an annual production capacity ranging from several hundred thousand tons to two thousand tons. Ranging from ten million tons.

According to the National Bureau of Statistics, in 2020, the total output of raw coal above designated size nationwide will be 3.84 billion tons, an increase of 0.9% year-on-year; among them, the output of raw coal in Shanxi Province in 2020 will be 1.063 billion tons, becoming the second annual output of raw coal in domestic history to exceed 1 billion. Ton province, and surpassed Inner Mongolia in terms of output, becoming the country’s largest coal-producing province again.

As a major domestic coal producer, Shanxi Province has recently undertaken the task of ensuring coal supply in the fourth quarter in more than a dozen provinces, autonomous regions and municipalities.

According to Xinhua News Agency, on September 29, the fourth quarter coal mid-to-long-term contract signing meeting for the 14 provinces, autonomous regions and municipalities in Shanxi Province was held in Taiyuan, Shanxi. In accordance with relevant requirements, the central coal enterprises in Shanxi will guarantee supply to 5 provinces and cities including Tianjin, Fujian, Hebei, Guangdong and Liaoning, and Jinneng Holding Group will connect with 6 provinces, regions and cities including Guangxi, Jiangsu, Jilin, Anhui, Shanghai, and Zhejiang; Shanxi Coking Coal Group undertakes the task of guaranteeing supply in Henan Province; Huayang New Material Technology Group undertakes the task of guaranteeing supply in Hainan Province; Lu’an Chemical Group undertakes the task of guaranteeing supply in Shandong Province, and the remaining tasks of guaranteeing supply are undertaken by coal companies in Shanxi Province.

According to the 21st Century Business Herald, Meierya Futures believes that the 27 coal mines in Shanxi that will stop production may cause a bigger gap after the holiday, and the coal industry’s capacity contraction is superimposed on the dual control of energy consumption and increased demand. Time seems hard to see signs of improvement.

The latest research report of Guotai Junan also stated that the global energy shortage is a foregone conclusion, coal prices are still expected to rise more than expected in October, and the gap of thermal coal in the dynamic peak season will be further enlarged.

According to the China Fund News, some institutions said that during the National Day, more than 20 coal mines in Shanxi were closed due to flood control, which may cause a larger gap after the holiday. Although there are sporadic imports of coal into Hong Kong, the effect remains to be seen. In terms of imported Mongolian coal, it is still difficult to increase Mongolian coal in the later period, which is relatively supportive for high-priced coking coal. The follow-up focus will be on the progress of the reduction of crude steel, the extent to which it affects the demand for bi-coke, and whether the thermal coal supply policy can increase the supply of coal blending.