Resources Alert : China coal market: Renewed regulatory attention Coal price rises WoW: Spot coal price rose by Rmb10/t WoW to Rmb690/t on 19 April 2010 (Qinhuangdao's Shanxi 5,500kcal blend). The price bounced Rmb15/t from the recent trough of Rmb675/t on the back of 1) renewed regulatory attention after the Wangjialing (WJL) mine accident and 2) the impact of recent drought on hydro output.
Renewed regulatory attention: After the WJL accident, the State Administration of Coal Mine Safety indicated it will conduct a nationwide safety review of 7,000 mines, covering 1.5bn tons of production. Today, the NDRC website released a notice on mine construction safety. The notice stipulates that the approval for mine construction resulting in 600ktpa of incremental output or a higher regulatory level of production (ranging from 30-600ktpa incremental output) will need to be copied to the NDRC and the National Energy Administration. The notice also specifies safety requirements and milestones to measure the progress of construction. The impact on production has not been notable, but the renewed regulatory attention increases the supply risk, which is a key thesis in our multi-year tight supply-demand view.
Drought: As we discussed in our China Coal Watch dated 13 April, supply-demand can tighten in case the drought persists. There has not been significant improvement since, and the recent moves in spot prices and the drop in IPPs' coal inventory also suggests that the situation has not improved.
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