Perth — China's central government is likely to relax its strict 276-day annual operating limit on coal mines after meeting with major domestic producers and customers Thursday, market sources said.
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National Development and Reform Commission officials agreed action was needed to cool escalating spot prices for domestic thermal coal after hearing from power utility and end-user customers, market sources said.
The main outcome of the meeting convened by the NDRC in Beijing was that the restriction on domestic coal mines operating for a maximum of 276 days a year would remain in place for the foreseeable future, but producers could be granted permission to increase production in response to sharp rises in spot prices and to decrease it if prices fell, sources said.
Some mines could also receive permission to operate for six days a week, up from the current five, sources said.
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The analogy of turning a tap on and off was used to describe the Chinese central government's new approach to controlling domestic coal prices through adjustments to domestic coal production, sources said.
China's Coal Association will oversee any variation in coal output volumes at individual mines, the sources said.
At Qinhuangdao port in north China, spot prices for September cargoes of 5,500 kcal/kg NAR domestic thermal coal have traded as high as Yuan 550/mt FOB this week, up from Yuan 400/mt in June, traders said.
One coal trader in China said the potential for producers to vary production levels could impact traditional winter re-stocking patterns in China as producers caught offguard by any changes in spot prices could adjust their production levels accordingly.
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