China to Fine Coal Miners Exceeding Output Limits as Prices Drop

Aug 21, 2014 12:04 am ET

Aug. 21 (Bloomberg) -- China will fine coal miners as much as 2 million yuan ($325,200) if they exceed national production limits after prices fell to the lowest in almost seven years.

Miners in the world’s largest coal consumer that exceed their annual registered output quotas will be fined 500,000 yuan to 2 million yuan, the National Development and Reform Commission said in a statement on its website today. Those violating targets will face suspension. Coal miners aren’t allowed to let their monthly supply go over 110 percent of the average planned figure, said the country’s top economic planner.

The Chinese government is proposing production cuts after the country’s benchmark coal price fell 21 percent this year to a range of 470 yuan to 480 yuan a metric ton as of Aug. 17.

China Coal Energy, the second-largest producer, reduced its 2014 output target by 10 percent because of weak demand and low prices, Wu Jun, the president for sales, said on Aug. 18. Shenhua Group, the biggest producer, will cut supply by 50 million tons, the Economic Information Daily reported July 28.

“Overproduction has been spreading unchecked and thus disturbing market orders,” the NDRC statement shows. Producers without a monthly output plan shouldn’t produce more than one- twelfth of their annual registered capacity, it said.