An explosion occurred last Fri (22nd) night at the Liushenyu Coal Mine of Shanxi Tongzhou Group in Qinyuan County, Changzhi City, Shanxi Province, resulting in 82 deaths, 128 injuries and two people missing. BOCI said in a report that to ensure coal mine safety measures meet standards, some coal mines in other parts of Shanxi Province have voluntarily suspended production for safety inspections. According to China Coal Resource (sxcoal.com), another 96 coal mines in Shanxi Province (excluding Qinyuan County) began suspending production between May 23 and 25, with total annual capacity of 107 million tonnes. The suspension period is generally expected to last three to five days.

The report stated that despite the severe casualties, the response from the National Mine Safety Administration (NMSA) has been relatively mild. Amid the current tight supply in the thermal coal market, NMSA may have placed a higher priority on ensuring supply. It would also be unreasonable to impose harsh penalties on large state-owned coal mines that strictly comply with government safety regulations due to faults at small private mines.

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Except for coal mines in Qinyuan County, which may face longer suspensions, the other aforementioned mines are expected to halt production for only three to five days, implying limited impact on overall coal supply. The impact on coking coal supply is relatively greater, as Changzhi City is one of the major coking coal production areas in Shanxi Province. A prolonged shutdown of coal mines in Qinyuan County would reduce domestic output of washed coking coal by 3%, based on a 50% processing recovery rate.

BOCI noted that so far the incident has had a relatively mild impact on thermal coal prices. The price of 5,500 kcal/kg thermal coal in Qinhuangdao rose 1% to RMB843 per tonne on May 25. Price movements in coking coal were more pronounced, with the ex-factory price of premium hard coking coal in Shanxi Province rising 2% on the same day. Coking coal futures on the Dalian Commodity Exchange surged 6% that day. The broker believes the price movement in the coking coal futures market appears somewhat excessive and does not rule out speculation aimed at pushing up futures prices to drive related share price movements. In any case, due to weak demand from the property sector, Chinas steel output is declining. According to data from the National Bureau of Statistics, pig iron production in the first four months of 2026 fell 3.1% YoY. A modest decline in coking coal output could help bring the coking coal market into better balance.

Among the four Chinese coal producers covered by the broker, only a small coal mine in Shanxi Province under YANKUANG ENERGY (01171.HK)  +0.400 (+2.825%)    Short selling $132.24M; Ratio 24.498%   , accounting for 0.8% of its 2025 coal output, suspended production for three days for safety inspections. All other coal mines are operating normally. (da/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-29 16:25.)

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