January 29, 2016 / 5:21 AM / 3 years ago

China coal giants to shut for Lunar New Year, cite sector slowdown

* Shenhua, China Coal Energy, Datong Coal, others sign declaration

* Say China coal miners to get time off over Lunar New Year

* Miners typically expected to work to meet peak holiday demand

By David Stanway

BEIJING, Jan 29 (Reuters) - In a break with tradition, 15 Chinese coal mining groups have said they will close operations and allow workers to leave their posts during the Lunar New Year holidays next month, taking some pressure off a sector burdened by massive overcapacity.

Any suspension of output over the week-long holiday, which starts on Feb. 7, could underpin coal prices that shed nearly a third last year. Spot thermal coal in Qinhuangdao port has risen 1.4 percent to 375 yuan ($57.03) per tonne this week, not far from a multi-year low of 370 yuan. SH-QHA-TRMCOAL

Lower demand and high supplies have led to the price rout, leaving the sector in a crisis, the miners said in a declaration released this week and published on company websites. Suspending operations over the holiday would ease the pressure, they added.

Miners are normally expected to work through the holidays in order to guarantee supplies over the period when power and heating demand typically hit a peak. During the holiday, state leaders are often filmed visiting miners working underground.

“On the condition that we can maintain safe production and stable supplies, and barring any special circumstances, we declare that we will cease operations during the 2016 Spring Festival holiday and workers will go on holiday,” the miners’ declaration said.

China’s top coal producers - the Shenhua Group, China Coal Energy Group and the China Datong Coal Group - that account for about a fifth of national output, have signed the declaration.

China Coal Energy’s Shanghai-listed unit said its losses in 2015 could have been as high as 2.8 billion yuan, while Datong Coal’s listed vehicle also warned of about 1.7 billion yuan in losses, blaming the supply glut.

Another signatory, the Longmay Group, based in northeast China’s Heilongjiang province, said last year that it was planning to lay off 100,000 miners. Thousands had already been put on leave with reduced pay.

While China is the world’s top coal consumer, demand has been on the wane as economic growth slows and the country shifts away from fossil fuels in order to curb pollution. China aims to close 4,300 mines and re-employ a million workers in the coming three years.

China produced 3.7 million tonnes coal last year and has an estimated capacity surplus of 2 billion tonnes per annum.

The shutdown over the Lunar New Year is being made “to implement policies and measures to control output, support prices and maintain stability”, the declaration said. ($1 = 6.5751 Chinese yuan) (Reporting by David Stanway; Editing by Himani Sarkar)

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