China's local governments in coal-rich provinces should try to reduce coal production by at least 10% during the second half of this year as an oversupplied market has led prices to tumble to multi-year lows, the head of China National Coal Association said Thursday.
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"It is imperative to reduce output to ease oversupply pressure, otherwise the market could worsen further," said Wang Xianzheng, chairman of the CNCA, at an industry forum held in the northeastern coastal city of Dalian.
The government should also look at curbing coal imports with high sulfur content and lower heating value, and restrict the sale and use of imported coal with ash above 16% and sulfur above 1% in coastal metropolitan areas, Xianzheng said.
Customs tariffs for both imports and exports should be "adjusted" so as to encourage imports of higher-quality coal into the southeastern coastal provinces, and support large domestic coal groups to export coal to other countries, he said.
China currently levies no import tariffs on coal but imposes a 10% duty on exports. The country's coal imports rose 0.9% year on year to 160 million mt in the first six months of this year, including 36.2 million mt of lower-grade lignite, up 19.6% year on year.
Trade sources said that the customs department has been recently refusing to grant clearances for imported coal with more than 1% sulfur content in some areas.
Additionally, Xianzheng urged local governments to alleviate the burden of coal miners by cleaning up various taxes and fees, while enhancing financial support.
More than 70% of China's coal companies are making losses and more than half of them are struggling to pay worker wages, he said.
Growth in China's coal consumption has slowed since the second half of 2012, amid a slowing economy and government efforts to improve air quality.
While authorities have shut hundreds of small, unsafe and inefficient mines, many new large-scale mines are still being built.
The Fenwei/Platts CCI 1 index for domestic 5,500 kcal/kg thermal coal traded at Qinhuangdao on an FOB basis was assessed down Yuan 1.50/mt day on day at Yuan 476/mt ($76.87), inclusive of VAT, Thursday -- a drop of 23.5% from the start of the year, data showed.
Fenwei Energy is a leading provider of coal market information in China.
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