The price of coking coal in China jumped by 8% after a deadly mine accident in Shanxi province that prompted safety checks that will affect production over the near term. The most actively traded coking coal contract on the Dalian Commodity Exchange hit the equivalent of $186.76 per ton following the accident.

Reuters reports that eighty-two people were killed after a gas explosion in a mine in one of China’s largest coal-producing regions, which makes it the most serious mine accident in the country since 2009 at least.

The government immediately launched an investigation into the causes of the accident, which would inevitably affect production, leading to a jump in prices. The accident itself will also affect coking coal production, with CNN citing Chinese media as reporting that the blast caused walls in the mine to collapse and the site of the accident to fill with water.

There is also a risk of secondary disasters at the mine, with the chief of emergency services of the city where the mine is located, Changzhi, saying that “During the rescue work…toxic and harmful gas has exceeded the limit for a long time.”

Coking coal is used in steelmaking and other heavy industries, with China a major consumer of both local and imported coal. The state has imposed limits on the commodity’s prices, and today, those limits were hit because of the mine accident.

Separately, several other coal mines in Shanxi suspended operations for several days as the authorities conduct safety checks, Reuters also reported, citing consultancy Mysteel. The suspensions would reduce coking coal output by 288,000 tons daily, the report noted, adding that iron ore and steel prices also gained following the explosion in Changzhi.

The Chinese government has been conducting safety checks on coal mines all over the country in a bid to reduce the risk of accidents, but also to put a lid on production growth.

By Irina Slav for Oilprice.com

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