August 12, 2015 / 6:20 AM / 4 years ago

UPDATE 1-China's July coal output dips on low prices

* Downstream sectors of power, steel and cement all down in July

* Prices still low, recovery seen unlikely in August

* Benefits from RMB devaluation, import decline seen limited (Adds detail, background)

By David Stanway

BEIJING, Aug 12 (Reuters) - China’s coal output fell 3.1 percent in July from a year earlier to 307 million tonnes, as miners scaled back their operations in a bid to minimise losses due to low prices.

More than 70 percent of China’s coal mining firms suffered losses in the first half of 2015 and many have cut back output, according to state planning body, the National Development and Reform Commission.

Over the first seven months of 2015, total coal production fell 5.3 percent from the same period a year ago to 2.1 billion tonnes, figures from the National Bureau of Statistics showed on Wednesday.

Thermal coal at the port of Qinhuangdao SH-QHA-TRMCOAL traded at 410-415 yuan per tonne during July, around 20 percent lower than at the start of the year.

Domestic production cuts were partly offset by imports in July, which rose 28.1 percent on a month earlier to reach 21.26 million tonnes, the highest level since December, according to customs data.

Coal imports were still down 34 percent in the first seven months of the year, and analysts said this week’s decision to allow China’s currency to devalue could dent them further.

Coal production normally spikes over the summer months as power plants cope with a seasonal surge in electricity consumption, but the increase in residential use has been offset by weak industrial demand.

Total power production reached 509 billion kilowatt-hours in July, down 2 percent on the year. Thermal power plants, overwhelmingly fuelled by coal, produced 365.8 billion kWh, down 3.1 percent.

Downstream sectors remained weak, with cement production dipping 4.7 percent year-on-year in July. Crude steel output dropped 4.6 percent on the year to 65.84 million tonnes.

The Chinese government has been waging a “war on pollution” and key regions like Beijing, Hebei and the Yangtze river delta are under pressure to slash coal consumption, adding to oversupply problems.

But despite promises to restrict production growth, authorities have still given the go-ahead for nearly 50 million tonnes of additional coal mining capacity to go into construction this year.

Analysts said there is still little pressure on power plants to replenish their inventories, and many are awaiting further price cuts in August.

“There is no downstream restocking, and the procurement levels of coal-consuming enterprises have again contracted,” said analysts with Shenwan Hongyuan Securities in a note on Wednesday.

Production of coking coal, used to make steel, fell 6.5 percent on the year to 37.57 million tonnes. It is down 3.9 percent over the first seven months of the year at 263.9 million tonnes. (Reporting by David Stanway; Editing by Richard Pullin)

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