China halfway to target to reduce coal capacity by 800m tonnes

Objective part of efforts to modernise nation’s economy and cut back heavily polluting industries such as coal and steel

PUBLISHED : Friday, 11 August, 2017, 2:06pm
UPDATED : Friday, 11 August, 2017, 8:35pm

China has hit the halfway point towards meeting it target of cutting coal mining capacity by 800 million tonnes a year by the end of 2020, the state planner said on Friday.

Tackling industrial and mining overcapacity has been a priority for Beijing to make China’s economy more efficient and environmental friendly. In its five-year plan for the 2016 to 2020 period, the government set the goal to reduce its coal production capacity.

Now, with coal mining capacity cuts of 111 million tonnes in the first half of this year, the total reductions for the period have been brought to 400 million tonnes, state planner the National Development and Reform Commission said.

Beijing juggles between cutting inefficient coal mining capacity and bad debt control

The massive capacity cuts have burdened coal producers with mounting debt and roiled markets as utilities have struggled to find enough supply. Thermal coal prices in China have more than tripled since the start of 2016 due to the curbs on production.

The commission said this year it has been easier for coal companies to get bank credit and that producers have had fewer bad loans and reported fewer cases of unpaid wages to workers.

Reflecting the improved situation for miners, the debt ratio for China Shenhua Energy – the stock market listed unit of state-owned Shenhua Group, China’s biggest coal producer – fell to about 1.6 by the end of the first quarter this year from 5.26 at the end of March last year.

Four sectors – coal, steel, cement and non-ferrous metals – owed a combined 10.2 trillion yuan (US$1.5 trillion) in debt as of last year, according to a government document.

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The commission will make more effort to help coal producers deal with their debts and give workers laid off from coal mines professional training, it said.

China produced 3.64 billion tonnes of coal in 2016, down nine per cent from the previous year, according to the National Bureau of Statistics.