China plans to preliminarily set up a coal production capacity reserve system by 2027, aiming to stabilize prices and enhance supply of the material, according to a draft plan issued by the National Development and Reform Commission (NDRC) on December 6.

 

It proposed orderly approving construction of some coal mine projects to form certain scale of dispatchable coal production capacity reserves in five major production bases, including Shanxi, Mengdong (east Inner Mongolia), Mengxi (west Inner Mongolia), Shaanbei (northern Shaanxi), and Xinjiang.

 

Coal mines with annual capacity at least 3 million tonnes, either new or under construction, can apply to be included, said the NDRC, adding large modern opencast mines and underground mines with high safety standards would be prioritized.

 

These mines, with designed capacity divided into regular and reserve capacities, must be able to dispatch output when the government deems spot prices to have exceeded a reasonable range or when supplies are tight.

 

By 2030, the NDRC aims to further improve the reserve system with more robust production capacity management, achieving dispatchable capacity reserves of 300 million tonnes per annum.

 

The draft said capacity reserve mines building 20%, 25%, or 30% of their designed capacity for reserves will be exempt from 60%, 80%, or 100% of capacity swaps for their new capacity increases, including regular and reserve capacities.

 

For mines that have been approved capacity swap plans, including those still under construction, 60%, 80%, or 100% of their total approved capacity swap targets can be utilized for other uses while leaving 20%, 25%, or 30% of their designed capacity for reserves.

 

The policy, if finally implemetned, will boost China's coal supply guarantee capabilities and continually enhance the flexibility and resilience of supply, according to the draft plan.

 

China previously set a goal to have coal reserves equivalent to 15% of its annual consumption, which is currently at mines, ports, power plants and some designated storage areas.

 

The mines, which have to apply for approval, must also be able to dispatch output when the government deems spot prices to have exceeded a "reasonable" range or when supplies are tight.

 

Early last year, China planned to add 300 Mtpa of coal production capacity in 2022.