Whitehaven Coal Sees China Easing Mining Limits to Boost Supply

  • Efficient, safer mines may be spared restrictions, Flynn says
  • Coal prices have surged as China’s output cuts tighten supply

China will continue to relax policies designed to shrink its coal production capacity by allowing some mines to boost output to cool rising prices, according to Australia’s Whitehaven Coal Ltd.

The world’s biggest producer and user of the fuel may increase the number of days of production allowed at “better mines” while limiting activity at less efficient ones, Paul Flynn, Whitehaven managing director, said in a phone interview Monday. The government has begun relaxing its policy announced earlier this year for miners to cut production to the equivalent of 276 days of supply, from the standard 330 days, a move that has resulted in rising imports and prices.

"I don’t think we should think that what they’ve implemented now will stay the same,”  Flynn said in a phone interview. “Your baseline assumption should be that there will be refinements to this over time.”

China’s government ordered producers to cut output as part of efforts to rescue indebted miners suffering from a supply glut. As a result, Australian thermal coal prices have jumped about 70 percent this year, while coking coal has nearly tripled.

Whitehaven, which produces semi-soft and thermal coal, operates five mines in Australia’s New South Wales state and boosted its production by 20 percent to 5.16 million tons in the July-September quarter, the company said Monday. Shares rose 3.5 percent to close at A$2.97, the highest since Feb. 25, 2013.

China’s imports last month slipped from the highest in almost two years as miners tried to raise output before peak winter demand, customs data showed last week. Purchases were still nearly 40 percent higher than the same month last year. Qualified miners will be allowed to increase capacity this quarter beyond the 276-day limit, National Development and Reform Commission official Zhao Chenxin said at a briefing Thursday in Beijing.

The country will likely eventually cut 500 million to 700 million tons of capacity from overall annual production of about 3.6 billion tons, according to Flynn, who didn’t provide a timeline.

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