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PrintTop coal producer and consumer China cut coal output targets at the top three producing regions by as much as 7% from a year ago to ease a supply glut caused by a slowdown in economic growth, which has also weakened global prices.
The National Development and Reform Commission a top government economic planning agency, set China's total coal output for 2012 at 3.65 billion tonnes, an increase of just 3.7% from year ago and a deceleration from the 8.6% growth of last year and 9% the year before.
Softening demand from China, where the economy is growing at its slowest pace in more than three years, has dragged prices of coal, iron ore and other commodities to multi-year lows, hurting the profits of global miners such as BHP Billiton and Vale SA.
Coal accounts for about 80 percent of the fuel China uses to generate electricity, but the waning growth has reduced demand for power from manufacturers and cut the increase in total electricity generation to around 2 percent so far this year, compared to 12 percent for the whole of 2011.
The NDRC said production targets for the regions of Inner Mongolia and Shanxi were reduced by around seven percent compared to last year's output and Shaanxi region's output was lowered by around one percent.
All targets are also below earlier forecasts by the local governments: Inner Mongolia, China's top coal producing province, was lowered to 920 million tonnes from an estimate of more than one billion tonnes and Shanxi's targeted output was cut to 810 million tonnes from a previous forecast of around 900 million tonnes.
Shaanxi's production target was also lowered to 400 million tonnes, against an earlier forecast of 460 million tonnes.
Ms Helen Lau a senior commodities analyst at investment firm UOB-Kay Hian said that "NDRC's conservative production guidance for Inner Mongolia and Shanxi implies that the two provinces have to cut back their production significantly.”
Chinese miners will now follow counterparts in top coal producers Australia, Indonesia, Russia and the United States in cutting production as they grapple with global prices which have fallen about 20% so far this year.
Customs data showed that the cut in output targets follows double-digit growth in coal production from Inner Mongolia and Shanxi from year ago, which had driven national output 9 percent higher and created record high stockpiles at the key Qinhuangdao port of 9.5 million tonnes by mid June.
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