China’s coal use is forecast to fall a third year as industrial output slows, adding force to President Xi Jinping’s drive to cut overcapacity and dimming the hopes of global miners for an uptick in demand by the world’s biggest consumer.

Demand will slide 2 percent this year and prices will remain at a low level, according to the state-run Xinhua News Agency, citing Xu Liang, deputy secretary general of the China Coal Industry Association. Output by the world’s largest producer will also fall by 2 percent.

Consumption has weakened amid a push to use cleaner fuels and shift a slowing economy away from heavy industry. Demand for coal, which accounted for 64 percent of the country’s total energy use last year, contracted 3.7 percent last year, following a 2.9 percent decline in 2014, according to the National Bureau of Statistics.

“This year’s coal situation is equally bleak,” Xinhua quoted Xu as saying.

Easing Appetites

China’s easing coal appetite has helped push prices in Asia to their lowest since 2006, punishing mining companies and prompting the government to propose capacity cuts that threaten the jobs of 1.3 million coal miners.

By cutting capacity in the next two to three years, production could fall to about 3.5 billion to 3.6 billion tons, balancing supply and demand, Xu said. The country aims to eliminate as much as 500 million metric tons of coal capacity by 2020, almost 9 percent of its total.

Coal output dropped 3.3 percent to 3.75 billion metric tons last year, while consumption slipped to 3.965 billion tons, both sliding from record highs in 2013, according to Xu. Use of the fuel in power generation dropped 6.2 percent last year, while demand from industries including steel, cement and glass making declined.

Source:
courtesy of BLOOMBERG

by Bloomberg

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