Is China Headed for Coal Production Overcapacity?

Source:

"China's government hopes to achieve more mergers and acquisitions to generate larger mining groups. . ."

The deputy director of the China Coal Industry Association says "weak demand has resulted in a clear trend for overcapacity" in the country's coal industry.

The nation's coal production increased 6.8% year on year to 827 million tons in the first four months of this year, the association estimated.

Last year, China mined 2.72 billion tons of coal and consumed 2.74 billion tons.

Jiang Zhimin, deputy director of the China Coal Industry Association, told the 5th China Energy Strategy Summit in Beijing that the industry faces challenges of eliminating outdated production facilities and the construction of more modern and large coal mine groups. It is estimated that 70% of the 80,000 coal mine companies in China are small with an annual production averaging 300,000 tons.

He said the country has 24 coal mine groups which each have an annual production of more than 10 million tons. Collectively, they mined 840 tons last year. Jiang estimated that the nation's coal demand will exceed more than 3.5 billion tons in 2020.

"While we tackle the financial crisis, we should eye the long-term development of the coal industry," Jiang suggested. "We should consider building more internationally competitive coal mine groups and increase spending to curb major colliery accidents."

China Daily reported China's government hopes to achieve more mergers and acquisitions to generate larger mining groups for efficiency and safety.

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