MYSTEEL: China's thermal coal sector shrugs at capacity- cut rumors

Despite recent market rumors about production capacity cuts in some of China's major coal-producing regions, actual thermal coal supply has so far not been disrupted, Mysteel has determined after surveying multiple coal mines on January 8.

Market jitters had been sparked on Wednesday by news that 52 coal mines in Northwest China's Shanxi province ~ which had previously been granted additional production capacity - had failed to fully meet long-term contract supply obligations during the 2024-25 period, as Mysteel Global reported.

As a result, 26 of them were allegedly required to surrender their added capacity, totalling about 19 million tonnes per year, while the remaining 26 would be allowed to temporarily retain their additional capacity, pending their performance in 2026.

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At the same time, separate market chatter suggested the Shanxi adjustment could form part of a broader capacity exit of around 50 million tonnes per year across major producing hubs, including roughly 20 million tonnes per year in neighbouring Shanxi province and 11 million tonnes per year in Inner Mongolia, both in North China.

The unverified news quickly ignited bullish sentiment, lifting both thermal and coking coal markets. On January 7, China's coking coal futures surged to their daily limit, jumping 8 per cent to RMB 1,164 per tonne (USD 166.5 per tonne).

To verify the claims and assess any real impact, Mysteel surveyed coal producers in key regions, including eight mines in Shanxi with a combined capacity of 42.4 million tonnes per year and 10 mines in Inner Mongolia with total capacity of 90.7 million tonnes per year.

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Although respondents said they were aware of the rumours, none had received official documents or formal notices regarding capacity reductions, they said, and none reported any changes to their current production.

An Inner Mongolia-based miner said that in any case, any reduction in operations at some mines was unlikely to lead to any real supply tightness, citing the still-ample supply environment. "This is more likely to stir market sentiment than to have a tangible impact on fundamentals.” he noted.

Mysteel's latest nationwide survey of 462 thermal coal mines - accounting for around 65 per cent of China's total production capacity - showed that during January 2-8, average daily output rebounded to 5.45 million tonnes, up 10 per cent from the previous week. A dozen large mines which had suspended operations in late December after having exhausted their annual production quota for 2025 resumed mining at the start of the new year, Mysteel Global learned.

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Note: This article has been issued by Mysteel and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.