China is likely to ease mining safety curbs in Shanxi, the nation’s top coal producing province, despite a string of accidents that has reduced output this year to ease energy security pressure and rejuvenate the economy, according to Goldman Sachs.
The US investment bank forecast in a report this week that China’s annual coal production will grow by about 100 million tonnes compared with last year, in line with the 2024 targets of the main coal producing firms and provinces, but slower than the average growth from 2021 to 23.
Overall coal output narrowed to 0.8 per cent year-on-year in May, but production from January to May decreased 3 per cent year on year to 1.86 billion tonnes, according to the National Bureau of Statistics.
“We believe the weakness in China coal production has been driven by stricter mining safety checks, especially in Shanxi, China’s top coal-producing province,” Goldman analysts Wei Hongcen and Samantha Dart said in the report.
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At least 2 dead, 53 still missing after open-pit coal mine collapse in northern China
At least 2 dead, 53 still missing after open-pit coal mine collapse in northern China
“For the remainder of 2024, we expect a catch-up in coal production in Shanxi province, as it would be under both economic growth and energy-security pressures to loosen restrictions to produce more.”
In early April, Shanxi, the nation’s top producer of the commodity, accounting for a quarter of the output, issued a circular to strengthen mining safety measures because of several fatal accidents. Two separate accidents the previous month killed 12 people, which was preceded by dozens of fatalities the previous year.
The number of metal and non-metal mines in the province will be cut by at least a fifth by the end of this year compared with 2022, while the share of medium and large mines’ production will rise by 15 percentage points, the Shanxi provincial government said in a directive.
In a separate directive, the provincial government announced a coal output target of about 1.3 billion tonnes, 4.2 per cent lower than last year.
Shanxi, where mining contributes nearly a third of economic output, saw coal production plunge 16.9 per cent year on year in the year’s first four months to 369 million tonnes, amid tighter safety measures and weak demand.
In the first quarter, Shanxi’s gross domestic output fell 7.3 per cent in absolute value. If the impact of price disinflation is taken out, economic output grew 1.2 per cent, the weakest among the nation’s 31 administrative regions and much lower than the national growth of 5.3 per cent.
Sinopec Economics and Development Research Institute, a unit of the nation’s largest oil refiner, projected China’s coal consumption will peak at 4.37 billion tonnes next year and fall to 380 million tonnes in 2060, when the country aims to reach carbon neutrality.
Coal demand last year grew 5.6 per cent to 4.35 billion tonnes as the economy recovered from the Covid-19 pandemic, according to the National Bureau of Statistics.
Last year, coal and natural gas-fired power plants generated 69.9 per cent of the country’s electricity, versus 69.3 per cent in 2022, as droughts crimped hydro power production, even as wind and solar power’s contribution rose to 12.4 per cent from 11.5 per cent.