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China’s drive for record coal spurs yet another deadly accident

15th January 2024

By: Bloomberg

  

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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 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.

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 openpit 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.

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 seven-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.

Edited by Bloomberg

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