China restores networks as coal capacity hits 70pc

China has restored key logistics networks in its main coal-producing provinces with output capacity rising to just over 70pc, with at least one large-scale producer bringing all its mines back into operation.

China's authorities are focused on resuming business as steadily as possible despite the coronavirus outbreak, with the national energy administration declaring 1,274 coal mines are operating again, accounting for 2.915bn t of annual production capacity.

State-owned producer and utility Datang has helped lead the recovery, announcing that all its coal mines are back in operation after the extended lunar new year holidays.

Chinese efforts to boost production also helped to raise coal inventories in the key transshipment port of Qinhuangdao to 5mn t by the end of yesterday, the first time they have surpassed this level since 6 January when stocks were at 5.07mn t.

Deliveries on the new Hongnao rail network, which transports coal from northwest China's Xinjiang to Gansu and Sichuan provinces in west and southwest China, reached the monthly target of 500,000t on 17 February, 12 days ahead of schedule. This is helping to stabilise coal supply for these regions.

There has been a significant increase in the number of coal delivery trucks in some parts of the main coal-producing provinces of Inner Mongolia and Shaanxi, as transport restrictions gradually ease and more drivers are able to join the workforce.

Productivity challenges

Although coal mines have restarted, productivity in some private-sector mines continues to be hampered by manpower constraints. This is because these mines tend to rely more on migrant workers from other provinces facing difficulty returning to work as inter-provincial train networks are not yet fully operational, according to market participants.

The waiver of road toll charges could potentially help migrant workers from nearby provinces return to work more easily. But those that depend on trains to return from more distant provinces could face difficulty buying tickets at a time of high demand.

A producer from Inner Mongolia said yesterday that productivity at its mine had not improved much despite the reopening because most of its workers are still trying to travel back to work.

It is mandatory in many coal mines for workers to wear surgical masks because they work close to one another. The lack of masks in some localities has made it harder to increase productivity, market participants said.

Although more local authorities have tried to encourage production restarts, some fear worsening the spread of the coronavirus. Sichuan authorities continue to prevent the restart of any coal mine that has failed to convince authorities that its work plan will not compromise health and safety. Coal mines with production capacity of less than 300,000 t/yr are explicitly forbidden from restarting before the provincial government publishes a plan for these mines to resume operations.

Some market participants worry about the possibility of a fresh wave of coronavirus cases if health and safety measures prove inadequate to deal with the return of migrant workers. This could potentially derail productivity efforts and dampen industrial demand for electricity.

By Kelvin Leong