According to the latest data from China Securities International, the country will decommission 28.92 million tonnes of obsolete coke production capacity and add 58.575 million tonnes of new coke production capacity in 2021, resulting in a net increase in coking capacity by 29.655 million tons this year.
Despite these statements, according to Shenzhen-based brokerage Guotai Junan Securities, China is expected to experience record coal supply shortages in 2021.
This comes at a time when China is vigorously pursuing dual controls on energy consumption and energy intensity, limiting production in its high-energy domestic steel sector.
China requires steel mills to cut annual production in 2021 at or below 2020; a step that fits into the country's plan to achieve high carbon targets in the coming years.
Steel mills in provinces such as Jiangsu and Shandong are gradually expanding production cuts, which are expected to accelerate in the coming weeks, S&P Global Platts previously reported.
Meanwhile, China's coal sector is facing a number of challenges: domestic prices have skyrocketed in recent weeks.
Domestic prices for premium coking coal in Shanxi Province were at RMB 4,035 /t ($ 626 /t) on September 8, up 45% from August 11, according to Platts.
According to Guotai Junan Securities, China's coal supply has been impacted by ongoing stringent safety checks at mines, the government's policy to ensure sufficient supply and price stability for thermal coal, and reduced coal imports.
Experts believe that the increase in coal production in the PRC's domestic market will be limited in the near future, but expect that coal production will increase in the medium to long term amid government policies to ensure the supply of scarce materials.