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Shanxi issues capacity cut plan to save long-suffering coal industry

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Publish time: 29th April, 2016      Source: www.cnchemicals.com
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China’s coal-rich Shanxi province officially issued a coal industry supply-side structural reform plan on April 24, in order to save the beleaguered sector that has been struggling with excess capacity.The province’s coal industry has suffered from falling prices and rising stocks, and coal enterprises faced low profit and climbing debt ratio.The imbalance between supply and demand is the basic reason for the consequence. Backward management, low clean utilization, and falling international commodity prices also constrained development of the industry.The provincial government reiterated that no new coal mines will be approved in principle over the next five years.In the first quarter, Shanxi’s coal sales increased above 6 million tonnes on year, but the revenue fell more than 70 billion yuan ($10.8 billion).The top seven state-run coal enterprises in Shanxi -- Shanxi Coking Coal, Datong Coal Mine Group, Lu’an Group, etc. – saw combined debt excess 1 trillion yuan, and debt ration over 80%.The provincial government has announced to cut coal capacity by more than 100 Mtpa by 2020, and no more new coal projects will be approved in the next five years, according to the plan.Shanxi has reset coal capacity for its 562 mines from 909.25 Mtpa to 763.77 Mtpa, a decrease of 145.48 Mtpa, based on 276 days of working time compared with previous 330 days.Meanwhile, Shanxi has closed 16 illegal mines with combined capacity at 79.4 Mtpa, and another 207 consolidated mines were asked to suspend for at least one month.The province has started a three-month safety check in mines across the province.Based on all the measures, analysts predicted the province may reduce at least 100 million tonnes of coal output in 2016.