2016-02-09

Coal: Cut 500M Tons in 5 Years

CRIEnglish: China Pledges to Cut Coal and Steel Overcapacity
The State Council, China's cabinet, has announced plans to cut steel production capacity by 100 million tons over the next five years.

The country will also not approve any new coal mines before the end of 2019.

...The country will also shut down 500 million tons of coal capacity and consolidate another 500 million tons into the hands of fewer but more efficient mine operators in the next three to five years.

China Daily: China stops approving new coal mines
In the past five years, China eliminated about 560 million tons of coal production capacity and closed 7,250 coal mines.

The country had about 11,000 coal mines at the end of 2015 with a total capacity of 5.7 billion tons.

Bloomberg: China Puts Coal Production Capacity on Chopping Block
The plan comes a day after similar scheme for the country’s steel industry was unveiled. The world’s biggest producer will close between 100 million and 150 million metric tons of annual crude steel capacity by 2020, according to an outline published on the state council’s website Thursday. The steel industry cuts -- amounting to 13 percent of capacity at most -- fall short what’s required, according to analysts from Capital Economics Ltd., Macquarie Group Ltd. and Argonaut Securities.
Maybe it is window dressing to send a signal of "we're serious", but the ban on new mines is a red flag that the underlying problem of cheap credit may not be dealt with. The government will not cut off funding to the industry and let the inefficient producers and incompetently managed firms die, it will artificially suppress production and pick the winners. At least it makes investing easier.

China had about 10800 mines at the end of 2015, and more than 7000 of have production below 300,000 tons, about 10% of total output. All of those mines will be closed in 1 to 3 years, as will any mines with serious accidents. Through mergers and acquisitions, have all Chinese coal miners producing at least 3 million tons annually within 3 years.
煤炭业化解产能意见出炉 3至5年内退出产能5亿吨

No comments:

Post a Comment