Owing to the serious overcapacity of coal and
the continuous and huge decline in coal price, the coal-dominated economic
structure has dragged Shanxi’s economy into valleys. To solve the problem of overcapacity, Shanxi Province planned to reduce its coal capacity by at least 100 million tonnes
in the next five years.
Source: Internet
According to the Opinions on the Structural Reform of the Supply Front of Coal (hereinafter
referred to as the Opinions) released on 25th April, Shanxi Province
would reduce overcapacity in the industry in order, by the means of eliminating
inefficient capacity, pushing forward reorganization, replacing inefficient
production facilities, reducing capacities and putting off the
coal mining.
As industry players indicate, the quantity of capacity reduced has exceeded expectation of the industry.
According to the Coal Industry Department of Shanxi Province, up to 31st March, there were 562 coal mines in production in Shanxi Province, with a total production
capacity of 909 million tonnes. After 276 working days' re-check on those
coal mines, the total production capacity was reduced to 764 million tonnes. The reduced capacity accounts for 11% of the previous total.
The release of the Opinions would effectively
promote the implementation of the supply-front policy of Shanxi Province, and
the scale of the capacity reduction, reform on the state-owned enterprises and improvement of the pricing mechanism involved would all exceed expectation.
To strictly control coal resources and approval of coal producing projects, according to the Opinions, during
the 13th Five Years Plan period, Shanxi Province would not newly deploy
coal resources in principle.
In addition, Shanxi Province would approve neither
any new projects of the coal mine constructing, nor the technological
transformation projects of the newly-built or the examination projects that
aimed to improve the capacity, in order to reduce rather than
improving on the overall coal capacity all across Shanxi Province. Since 2016,
Shanxi Province has suspended the sell of mining right and exploration right of
coal mines.
According Southern Weekly, the seven
state-owned coal groups, with a debt ratio of 80% of the gross assets, were in
debt of more than trillion yuan, which is equal to the GDP of Shanxi Province of
2015.
The regulation department of Shanxi
Province would also crack down and punish those coal mines that were built or
operated illegally. The General Office of Shanxi Province asked all the coal
mines that subjected to the major five coal groups to shut down for overhaul
for at least one month. The Office also disclosed and shut down 16 coal mines
that have not fulfilled the examination and approval procedure yet.
In terms of the reform of coal enterprises,
the state-owned coal enterprises of Shanxi Province would improve the corporate
governance system and at the same time push forward the experimental company
for capital investment (operation). Datong Coal Mine Group Co. and the Jinneng
Group would be the experimental pilot of the reform.
What has been mentioned explicitly is to
promote the pilot project for reforming collectively by the means of joint
investment, cooperation, sale and ESOP, and thus to make the state-owned coal
enterprises a market-oriented and self-sustaining legal entity with
clearly-established ownership. At the same time, the enterprises, who can’t carry
out restructuring and reform, or cannot afford long-term suspension, or suffer
the insolvency, or can’t pay off their debt due would shut down or go bankrupt.
According to insiders, the reform of the
coal enterprises would sow the seeds of integrating the coal resource and
reorganizing the coal enterprises of Shanxi Province in the future.
It is believed that the launching of
various measures put forward by the Opinions would significantly improves the efficiency
of the reform in Shanxi Province. The problem of oversupply would be properly
solved and the coal price has begun to rebound.
*This
article is an edited and translated version by CCM. The original article comes
from Jiemian.com.
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