China's raw coal output shifted to a positive year-on-year rise in June, with daily production jumping to the second-highest in history, indicating a faster-than-expected recovery.

 

Such noticeable rebound may shatter some participants' illusion of the supply-side support for coal prices that has been on the downward trajectory since the start of the year.

 

Various factors such as strengthened safety and environmental inspections and miners' option to arrange production based on sales had restrained the overall supply recovery until May.

 

China produced 405.38 million tonnes of raw coal in June, up 3.6% year on year and 5.61% on the month, according to data from the National Bureau of Statistics (NBS).

 

 

Authorities have been strengthening energy security in the run-up to the summer peak period, especially for the mainstay coal. Production and supply of long-term contract coal grew accordingly in June, further boosting the raw coal output recovery.

 

The end of inspections also boosted production. For instance, some coal mines in Shanxi released more capacity in the wake of the special inspections in end-May, leading to a rebound in output.

 

Meanwhile, some mines in northwestern provinces began to produce coal from the previously granted mining rights, which also led to an increase in production.

 

Taking Gansu as an example, a total of 32 coal mining rights have been sold since 2022, and the approved capacity raised from 86.04 million tonnes in 2020 to 117 million tonnes in 2023. The province planned to approve the construction of 12 coal mines with an additional capacity of 33.1 million tonnes in 2024, which is expected to increase the total approved capacity to exceed 150 million tonnes by the end of this year.

 

As such, June's raw coal output hit a new high so far this year, and the fourth highest in history.

 

Daily figure provided a much clearer picture. NBS data showed China churned out 13.51 million tonnes of raw coal averagely each day, up 9.13% on the month and 3.95% on the year, reaching the second highest in history, second only to 13.80 million tonnes reached in November 2023.

 

The robust June output pushed the accumulative volume during the first six months to the second highest for the same period in history, only 1.7% lower than that in 2023.

 

A few coal mines in some key producing areas have recently halted production due to an important political meeting, which could restrain the further improvement of production in July. However, the supply guarantee for long-term contract coal during the summer peak demand month would help the overall production sustain at elevated level.

 

Hence, July's raw coal production was anticipated to remain high, but less likely to go up compared to the month-ago level.