As part of China’s efforts to modernize its country’s economy and taper down greatly polluting industries such as steel and coal, they wanted to reduce the coal mining capacity by 800m tonnes a year by the end of 2020. So far, China has reached the halfway point of achieving its target!
It has been a priority for Beijing to tackle industrial and mining overcapacity in order to make China’s economy more environmental friendly and efficient. In its plan for 2016-2020, the government set its goal to reduce its coal production capacity.
At present, with coal mining capacity cuts amounting to 111 million tonnes in the first half of this year, the total reductions for this period is 400 million tonnes, said the state planner of the National Development and Reform Commission.
However, despite the positive impact towards the environment, these massive capacity cuts have burdened coal producers. It caused mounting debt and seethed markets as utilities badly strive to find enough supply. More so, the price of thermal coal in China has been more than tripled since 2016 because of the curbs in production.
The commission mentioned that it has been easier for coal companies to get bank credit this year and the producers have had less bad loans and reported lesser cases of unpaid workers wages.
Looking on 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 – dropped to about 1.6 by the end of the first quarter this year from 5.26 at the end of March last year.
Greater efforts are to be made by the commission to help coal producers deal with their debts and provide workers laid off from coal mines professional training, it mentioned.