Coal industry faces problems

► Rise in prices, companies’ losses are main obstacles

China has made progress in reducing excess coal capacity, as domestic output slumped in the first eight months of 2016, the nation’s top economic planner said on Monday.

But experts warned that the implementation of the government’s agenda may still encounter difficulties, due to the rise in coal prices and domestic coal companies’ ongoing losses.

During the first eight months of this year, domestic coal output fell 10.2 percent year- on- year to 2.18 billion tons, according to a statement on the website of the National Development and Reform Commission ( NDRC) on Monday.

Coal delivered by rail amounted to 1.21 billion tons during the period, down 10.4 percent from a year earlier, the statement noted.

Coal stockpiles dropped 9 percent year- on- year to 125 million tons as of the end of August, said the statement.

“The figure shows that the government’s various policy tools, especially the 276- day annual operating limit for coal mines, have achieved positive results in controlling domestic coal output,” Wang Guoqiang, research director at the Beijing- based Lange Steel Information Research Center, told the Global Times on Monday.

The imbalance between supply and demand has been ameliorated, said Wang, noting that the average coal price is up about 40 percent so far this year.

The Qinhuangdao port coal price, the benchmark for China, surged by 180 yuan ($ 26.99) per ton to above 500 yuan per ton so far this year, the NDRC said.

But the rise may result in some local companies failing to carry out the government’s agenda, in a bid to make up for previous losses, warned Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University.

Mining companies have had shrinking profits and excessive debts this year, the Beijing- based Economic Information Daily reported on Monday, citing Wang Xianzheng, president of the China National Coal Association.

The total debt of major coal miners climbed 4.7 percent year- on- year to 3.66 trillion yuan as of July, with the average debt- to- asset ratio reaching 60, said the report.

“Most coal companies merely stop the operation of certain mines without actually cutting their overcapacity. The equipment, although not running, still has a high cost,” Lin told the Global Times on Monday, noting that this is where the ballooning debts stem from.

How to deal with laid- off workers associated with cutting overcapacity is another problem, Lin noted.

To cool prices, the NDRC announced plans on Friday to allow major coal producers to raise daily output by 500,000 tons.