China rejects plea by steelmakers for more coking coal - sources

BEIJING (Reuters) - China's state planner has rejected a request by steelmakers for coal mines to ramp up coking coal production to bring down prices that have rallied in the face of tight supply, sources said on Friday.

China is trying to cut inefficient coal production as part of efforts to reduce pollution and trim excess capacity but tighter supplies and increased consumption during the summer have pushed up prices.

Domestic prices of coking coal, a key ingredient in steelmaking, have more than doubled to 900 yuan per tonne in 2016, as years of oversupply came to an end.

At a hastily-called meeting on Friday in Beijing, the National Development and Reform Commission gave the green light for 74 major miners to increase output of thermal coal, two sources familiar with the meeting said, but rejected the request made by steelmakers earlier this month.

"The NDRC has decided not to interfere with the (coking coal) market," said an executive with a coking coal producer.

That increase in thermal coal production could unleash as much as 15 million tonnes a month of new capacity.

The NDRC said after the meeting that the coal price rally was not sustainable and the government had "plenty of measures and room" to manage prices, state television reported on its official microblog.

In a statement posted on its official website, the NDRC also said it would allow efficient coal mines to operate between 276 to 330 working days per year.

Traders were split on where the prices could go from here, though steel mills will not find any relief from domestic coking coal suppliers.

"We are close to an upper end of the price rally," said the coking coal executive, who declined to be named because he is not authorised to speak to media.

(Reporting by Kathy Chen and Josephine Mason; editing by Tom Hogue and David Clarke)