China's biggest coal-producing province to cut capacity

[SHANGHAI] China's biggest coal-producing province plans to cut production capacity of the polluting fuel as part of the nation's efforts to streamline bloated industries.

Shanxi, which produces more coal than any other nation, aims to cut at least 100 million metric tons of production capacity by 2020 as overcapacity, falling prices and losses at miners hurt its economy, the provincial government said in a statement on its website. The cut accounts for about 8 per cent of the northern region's total capacity, according to Leo Wu, an analyst with Guotai Junan Securities Co.

The world's largest coal producer is seeking to ease a glut of industrial capacity as it shifts toward consumer-led growth and tries to curb pollution. China plans to cut at least 9 per cent of its coal mining capacity within five years, the country's state council said in February. That may result in layoffs of about 1.3 million workers in the industry.

"The plan from Shanxi is quite conservative and below the national target," Guotai Junan's Mr Wu said by phone from Shenzhen. "If the coal market remains weak, Shanxi will probably cut more."

Shanxi province, dependent on coal-related industries for 80 per cent of its economy, said in a report last month that it is seeking overseas markets to absorb some of the excess supply.

It proposed that the central government reduce or scrap export quotas and cut taxes. The region produced 944 million tons last year, the biggest contributor to China's 3.68 billion tons of production and more than the entire output of the US, the world's second-biggest supplier.

BLOOMBERG