Overcapacity a Serious Problem in Coal Industry

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　　New analysis by the China National Coal Association through the first 7-months of this year is pointing to overcapacity still remaining a serious problem in this country's coal industry.

 

　　CRI's Li Dong has more.

 

　　The CNCA report shows that the country's total coal reserve currently exceeds 200 million tons, the highest amount in the past ten years. The revenue of the coal enterprises has dropped by about 50 percent on average compared to the same period last year. Vice¹ chairman of the association Jiang Zhimin says:

 

　　"24 of the 90 large-sized coal enterprises in our survey are operating in a deficit². This accounts for one third of the enterprises in the survey. Plus, all the enterprises in the provinces and municipalities of Heilongjiang, Jilin, Yunnan, Chongqing, Anhui and Jiangxi are experiencing losses."

 

　　Meanwhile, high prices and low demand has given overseas coal enterprises a big chunk³ of the Chinese market. In the first 7 months of 2013, China imported a total of 187 million tons of coal, up 14 percent from the year before.

 

　　Conversely, exports declined by 22 percent to 4.9 million tons.

 

　　In the past 10 years, an overheated market attracted too many investors⁴ to the coal industry. Statistics from the National Development and Reform Commission show that from 2000 to 2005, investment in the coal industry only totaled 200 billion yuan, but from 2005 to 2010, the figure soared to more than 1.2 trillion yuan.

 

　　To curb⁵ excessive investment, the central and local governments have made policies to integrate resources within the coal industry by closing small coal mines and developing middle and large-sized ones. But in Shaanxi Province, one of China's biggest coal output provinces, most enterprises are still operating at a loss.

 

　　Han Xiaoping, chief spokesperson of China5e.com, an energy information and consulting service provider, says the harsh market may deteriorate⁶ even further in the coming years.

 

　　"The integration⁷ of resources in many places in China, through closing the small mines and expanding the large ones has created some super-sized coal enterprises, which are luring⁸ more investment into the coal industry. This is resulting in overcapacity in the industry."

 

　　Once a coal mine is built, it needs to maintain operations at a certain level to ensure its survival. Excessive production may push current overcapacity situation to even more embarrassing levels.

 

　　In the first six months, the net profit of the country's large- and medium-sized coal producers declined by more than 43 percent from the same period last year.

 

　　China is the world's largest producer and consumer of coal, with official data showing the country's coal production as exceeding 3.6 billion tons in 2012.

 

　　For CRI, I am Li Dong.

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