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More mine safety checks in China stoking fears of coal supply disruption

Singapore — China's mine safety watchdog has ordered inspections over the weekend at "high risks" mines after recent industry accidents, stoking fears that thermal coal availability might be impacted in the near term.

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The National Coal Mine Safety Administration's order came after Beijing's State Council issued an urgent notice early last week following a major explosion at a chemical plant in east China.

The checks will start with immediate effect till June, the notice showed.

A forest fire that broke out in Shanxi province on Friday could have also stoked fears that this might affect coal production in the mine producing province, an east China-based trader said.

According to Xinhua News Agency, the forest fire, which lasted for two days was brought under control on Sunday.

Chinese thermal coal May futures contract jumped about 2% to around Yuan 606/mt during early Monday trade in Asia.

Spot domestic prices, which have been falling for the past two weeks, were seen to be little affected. Nevertheless, prices are expected to stabilize and may likely increase on the back of the news of further mine checks, market sources said.

S&P Global Platts assessed domestic 5,500 kcal/kg NAR grade of coal at Yuan 622/mt FOB Qinhuangdao on Friday, unchanged from Thursday.

HIGH RISK MINES

The checks will be targeted at mines that have been categorized as 'high risk' and which needed inspection. Market sources believe that mines which had already been inspected, may still be subject to some checks.

"Some of the mines might not be able to reach the safety standard, while some might have flouted the regulations or are lacking in good facilities," a China-based market source commented on the recent accidents.

The explosion at the chemical plant in Yancheng, Jiangsu province on March 21 killed 64 people, local media reported.

Separately, Chinese authorities have since ordered strengthening of checks across industries, including coal mining, other mining, transportation and construction to prevent similar industrial accidents from happening.

There were three mine accidents that happened in as many months, killing and injuring several people.

Earlier this year, local governments had ordered the shutdown of all coal mines in Shaanxi and Inner Mongolia to ensure safety standards. However, coal mines in both regions have resumed operations since, market sources said.

-- Hui Min Lee, hui.min.lee@spglobal.com

-- Edited by Norazlina Jumaat, newsdesk@spglobal.com