January 29, 2015 / 2:30 AM / 6 years ago

China 2014 coal output seen down 2.5 pct, first drop in a decade

BEIJING, Jan 29 (Reuters) - China’s coal production is estimated to have fallen 2.5 percent in 2014, the first annual drop in more than a decade, hit by a war on pollution and government efforts to tackle a supply glut as demand from industry and the power sector weakens.

The forecast by the China Coal Industry Association comes after official data showed China produced 3.52 billion tonnes of coal in the first 11 months of 2014, down 2.1 percent, with mines under pressure to cut output in the second half of the year in a bid to prop up plunging prices.

The National Bureau of Statistics has yet to publish coal production data for December or the whole year. China officially produced 3.7 billion tonnes in 2013.

Last year, Chinese power output growth was the slowest since 1998 while steel production growth was also the weakest in more than three decades, aggravating a coal supply glut.

Zheng Nan, an analyst at Shenyin Wanguo Futures in Shanghai, said falling industrial and residential demand made a 2015 recovery unlikely.

“It will remain at such a low level before 2020 given that the central government has already set the tone to curb air pollution,” he said.

China’s coal data is notoriously unreliable and often fails to take into account a vast amount of illicit, private production and consumption from poorly regulated industries. However, official data suggests that the last year-on-year drop in output was in 2000.

Production has more than doubled since then, causing chronic pollution problems in industrial regions as well as a surge of greenhouse gas emissions.

A decline in 2014 output supports a view that China is close to “peak coal” use, though the International Energy Agency said earlier this month that it expected Chinese consumption to continue rising until beyond 2020.

Some experts also warned it was too soon to say whether this represented a turning point.

Yuan Jiahai, professor at the North China Electric Power University, said shrinking exports and cooler summer weather in 2014 also contributed to the decline.

Jiang Zhimin, vice-president of the China National Coal Association, told state news agency Xinhua that he expected output to fall a further 2.5 percent in 2015.

Shenyin Wanguo Securities’ Zheng said any decline this year would be limited, with the state keen to preserve jobs.

The government has already tried to push production cuts to support prices and also imposed import restrictions. But efforts to support prices in 2015 could be offset by a campaign to slash consumption in more regions. (Reporting by David Stanway, Kathy Chen and the Shanghai Newsroom; Editing by Ed Davies)

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