China's coal de-capacity drive bears fruit, officials

2017-11-23 17:04:00 Policy,  Price

With years of all-out effort to reduce surplus capacity, China has made marked achievements in optimizing its coal industry structure, said chairman of China National Coal Association (CNCA) in the opening ceremony of the annual coal trade fair on November 21.


The achievements mainly embody in the improved coal industrial concentration, said Wang Xianzheng in his opening speech at the China Coal Trade Conference 2018.


In the first nine months, China's eight largest miners, including Shenhua and China Coal, contributed 38.92% of the country's total coal output.


The number of coal mines decreased from 10,800 in 2015 to less than 8,000 at present, Wang said, citing data from the National Energy Administration (NEA).


Specifically, there are 4,271 operating coal mines with production capacity totaling 3.41 billion tonnes per annum (Btpa), and 1,228 mines under construction, involving 1.05 Btpa of capacity, the NEA data showed.


Presently, the country has about 1,200 large modernized coal mines, with capacity combined occupying more than 75% of the country's total. Of this, 59 coal mines are 10-million-tonne level with capacity totaling 800 Mtpa.


Coal capacity is more concentrated in major northern production provinces, Wang said. In January-September, coal output of Shanxi, Shaanxi, Inner Mongolia and Ningxia accounted for 70.36% of all the country produced.


"It goes well in the de-capacity campaign with regarding to the total capacity cutbacks," Lian Weiliang pointed out, vice director of the National Development and Reform Commission, said at the opening ceremony.


"China's likely to complete coal capacity reduction target ahead of 2018," he said.


The Chinese government planned to eliminate 500 Mtpa of outdated coal capacity and regroup another 500 Mtpa in three to five years from 2016, showed a document released by the State Council early last year.


China has completed this year's coal de-capacity target of 150 Mtpa by the end of September, officials said.  

The aggressive de-capacity drive has caused tightness in coal supply, and further pushed up prices in certain period of time.


Data from showed the monthly average CCI index for the 5,500 Kcal/kg NAR coal was assessed at 722 yuan/t in October, 679.95 yuan/t in September and 629.22 yuan/t in August, all above the 600 yuan/t red alert line the NDRC underscored at the beginning of the year.


Although coal enterprises have made a killing through price rallies this year, there were 20.7% of them still in a loss amid bad assets and huge debts, said the CNCA's chairman.


"Most enterprises were in marginal profit. Their operation hasn't improved fundamentally," he said.


Shenhua, Shandong Energy, Shaanxi Coal Industry, Yitai Group and China Coal realized profits totaling 64.23 billion yuan in the first eight months, accounting 72.5% of the total profit of 90 large miners, Jiang Zhiming, vice chairman of the CNCA, said late last month,.


"In the next few years, not only will we accelerate phasing out outdated capacity, but also unleashing advanced capacity," said Lian, in an effort to address the side effects the de-capacity campaign brings.


"We will manage to make a dynamic balance between coal miners and end users in the process of structural optimization in the coal sector."


Shenhua, China Coal and other 273 large coal miners and Huaneng, Datang, Guodian and other 83 major power plants attended the opening.


A total 130 million tonnes of mid- and long- term supply contracts had been signed between the two parties on the day.

(Writing by Alex Guo   Editing by Harry Huo)
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