China looks to strengthen mine safety after frequent accidents, boosting coal prices

China has strengthened mining safety regulations, introducing better monitoring of operations and early warning systems to mitigate risks like gas explosions, fires and floods in coal mines, according to an official statement seen by S&P Global Commodity Insights Sept. 21.

The development requires stringent safety checks and follows frequent accidents at several coal mines in 2023, leading to multiple fatalities that halted operations. The world's largest coal consumer, which also has some of the most dangerous mines, has been facing domestic supply constraints since August due to regular safety inspections, leading to higher domestic coal prices.

The price of 5,500 kcal/kg NAR-grade thermal coal on a CFR South China basis was $99/mt on Sept. 4. It rose to $111.65/mt on Sept. 21, according to Platts pricing data from S&P Global.

Several coal mines in Shanxi province of North China have stopped operations after investigations found multiple safety issues during a recent survey, two traders based in Singapore and Indonesia said. A rise in industrial demand and preholiday buying made China the primary driver of prices in the Asian spot thermal coal market in the week started Sept. 18. Bid levels from Chinese buyers rose significantly compared with spot market prices a few weeks ago, market participants said.

The new safety measures are likely to have a better control over mines in China, possibly preventing accidents, a miner based in Indonesia said, adding that it will help the country increase its domestic production. "As the Asian Games are nearing in China, its power demand is likely to surge, which will need significant stock in the country," the miner said. The 2023 Asian Games are set to begin Sept. 23 in Hangzhou, China.

Market participants said the sudden rise in demand leading to stronger coal prices was, however, likely to be short lived, and both domestic and import prices could drop once Chinese utilities have replenished their stocks.

The national mine safety administration, which has been entrusted with the responsibility of mines supervision, risk identification and developing safety management systems, has established a monitoring and prewarning network to forestall major risks, according to the statement.

The network, which gathers data from all operational coal mines across China, can conduct real-time monitoring of more than 600,000 sensors across 800,000 miners at work. It can also monitor data from 390,000 video monitors, the statement said, adding that the network can provide analysis and prewarning to mining enterprises that are under threat of typhoon and heavy rain.

Earlier in September, China imposed a ban on the construction of new coal mines with capacities below 900,000 mt/year, particularly in difficult geographic terrains with higher risks of accidents.