China’s Shanxi gives coal firms $142 million for capacity cuts

Shanxi produced 944.1 million tonnes of coal last year, amounting to 25.6% of the national total.

By: Reuters | Shanghai | Updated: September 6, 2016 7:10 am
In slightly more than a month, its main stock market index (the Shanghai Stock Exchange) has fallen more than 20 per cent. Shanghai Stock Exchange

The northern Chinese province of Shanxi, the country’s biggest coal producing region, has awarded 947.78 million yuan ($142 million) to six major coal enterprises this year for shutting down surplus capacity, one of the firms said late on Monday.

In a notice to the Shanghai Stock Exchange, Datong Coal Industry Co. Ltd said it alone had received 312.16 million yuan from the provincial government after shutting down three mines with 3.75 million tonnes of annual production capacity.

China vowed in February to close 500 million tonnes of coal production in the coming three to five years in a bid to tackle an annual capacity surplus amounting to more than 2 billion tonnes. The country plans to close 250 million tonnes of coal production in 2016 alone.

The industry ministry said the country would provide 100 billion yuan this year to help handle layoffs in the coal and steel industries. According to China’s Ministry of Finance, a total of 30.7 billion yuan had already been allocated by August this year.

Shanxi produced 944.1 million tonnes of coal last year, amounting to 25.6 percent of the national total. The province cut output by 68.8 million tonnes, or 14.9 percent, in the first half of the year, according to the local government.

Its efforts to curb output have been a key factor in the recovery in coal prices this year, with prices of thermal coal at the key northern port of Qinhuangdao <SH-QHA-TRMCOAL> rising by more than a third since the end of 2015.

According to the official Xinhua news agency, central China’s Henan province also plans to award 2.18 billion yuan to encourage its coal and steel producers to slash capacity this year. The funds will be used to help pay for layoffs.

The province aims to cut 62.54 million tonnes of coal capacity and 2.4 million tonnes of crude steel capacity this year.