China Mulls Resuming Coal Output Curbs for Six Months (Bloomberg News – February 15, 2017)

China may not be done trying to manage coal prices. The world’s biggest producer and consumer is considering reinstating output restrictions to avoid the return of a glut after it eased limits during winter, according to people with knowledge of the plan.

The National Development and Reform Commission may resume curbs that cap output at an equivalent of 276 days of capacity after heating season ends in mid-March, said the people, who asked not to be identified because the information isn’t public.

The NDRC, the nation’s top planner, didn’t respond to a faxed request for comment and nobody answered calls to its press office Wednesday. China sent coal prices and mining shares on a tear last year after President Xi Jinping’s government imposed output restrictions aimed at easing an oversupply and supporting indebted miners.

As production slumped, officials scrambled late in the year to boost output ahead of peak winter demand. The possible reinstatement of curbs comes as benchmark coal prices have fallen more than 10 percent from their recent peak in November.

“The NDRC probably expects a decline in coal demand as the winter heating season ends, and so they are attempting to limit supplies so a new glut doesn’t emerge and knock down prices,” said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong. “The policy is likely flexible and NDRC may change it again according to supply and demand.”

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