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China to close over 1,000 coal mines in 2016

China will aim to close more than 1,000 coal mines over this year, with a total production capacity of 60 million tonnes, as part of its plans to tackle a price-sapping supply glut in the sector, the country’s energy regulator said.

A coal mine in China. Photo credit: bloomberg.com
A coal mine in China. Photo credit: bloomberg.com

China is the world’s top coal consumer but demand has been on the wane as economic growth slows and the country shifts away from fossil fuels in order to curb pollution.

In a notice posted on its website (www.nea.gov.cn) on Monday, the National Energy Administration (NEA) said the closures would form part of the plan released earlier this month to shut as much as 500 million tonnes of surplus production capacity within the next three to five years.

China has a total of 10,760 mines, and 5,600 of them will eventually be required to close under a policy banning those with an annual output capacity of less than 90,000 tonnes, the China National Coal Association has estimated.

China has promised to stop approving all new coal mine projects for three years in a bid to control capacity. The country produced 3.7 million tonnes coal last year and has an estimated capacity surplus of 2 billion tonnes per annum.

Last year, the supply overhang dragged down domestic coal prices by a third, but there has been some recovery this year with thermal coal at the port of Qinhuangdao up 2.7 percent at 380 yuan ($58.29) per tonne.

Apart from coal, China will also aim to tackle overcapacity in the thermal power sector this year by controlling new builds and cancelling projects in regions with the biggest capacity surpluses, the notice said, citing administration head Nur Bekri.

Utilisation rates in the power sector last year fell to their lowest since 1978, with demand failing to keep up with the rapid expansion in capacity.

As part of its power market reforms, China will further promote a scheme allowing suppliers to enter into direct power sales agreements with consumers, and also work to reduce power prices this year, it said.

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