China’s biggest coal-producing province plans to cut production capacity of the polluting fuel as part of the nation’s efforts to streamline bloated industries.
Shanxi, which produces more coal than any other nation, aims to cut at least 100- million tons of production capacity by 2020, as overcapacity, falling prices and losses at miners hurt its economy. The cut accounts for about 8% of the northern region’s total capacity, according to Leo Wu, an analyst with Guotai Junan Securities.
The world’s largest coal producer is seeking to ease a glut of industrial capacity as it shifts toward consumer-led growth and tries to curb pollution. China plans to cut at least 9% of its coal mining capacity within five years, according to the country’s State Council. This may result in retrenchments affecting about 1.3-million workers in the industry.
“The plan from Shanxi is quite conservative and below the national target,” says Wu. “If the coal market remains weak, Shanxi will probably cut more.”
Shanxi province, dependent on coal-related industries for 80% of its economy, said in a report last month that it was seeking overseas markets to absorb some of the excess supply. It proposed that the central government reduce or scrap export quotas and cut taxes. The region produced 944-million tons last year, the biggest contributor to China’s 3.68-billion-ton production and more than the entire output of the US, the world’s second-biggest supplier.