Its goal this year was to close 150 million tonnes of capacity, compared with the 250Mt set for 2016, according to the ANZ Commodity Report.  

“It will also suspend or stop construction of no less than 50 gigawatts of coal-fired power generation capacity,” the report states.

“By the end of April, China had cut its coal capacity by 68.97Mt, which is approximately 46% of this year's target.

“While China can’t realistically cut its reliance on coal, it can use it more efficiently and cleanly. It has already started targeting an increase in the coal washing rate, as well as displacing polluting low-quality coal in residential heating and industrial boilers. 

“This is likely to mean demand for higher calorific coal should increase.”

To mitigate the impact on domestic prices, the government encouraged production at the larger operations. 

It has also continued to allow coal producers to operate above the “276 day” policy it implemented in 2016. 

That has led to China’s coal production rising 5.6% year-on-year in the first half of this year.

“Signs are emerging, however, that this strategy has reached its limit,” the ANZ 

report states.

“China’s State Council warned [last] week that the country shouldn’t blindly expand coal production amid high prices. 

“It urged to eliminate outdated coal capacity and shut down coal mines that fail to meet safety requirements.

“Adding to this dynamic is the need utilities have to restock to mitigate fluctuations in prices. The National Development and Reform Commission recently published a communique on its website saying it will supervise and guide coal producers and users to maintain reasonable coal stockpiles to ensure stable supply.” 

For coal-fired power plants in provinces, including Shanxi and Inner Mongolia, coal stockpiles need to be enough to cover at least 15 days of use.