Structural De-productivity Systematic High-productivity Coal Industry Operation

After completing the 13th Five-Year Plan target of capacity removal two years ahead of schedule, the State Development and Reform Commission, Ministry of Industry and Information Technology and State Energy Administration recently issued "Key Points of Coal Melting Overcapacity Work in 2019" (hereinafter referred to as "Key Points of Work") proposed that special supervision and spot checks would be carried out to consolidate the results of overcapacity removal, expedite the clearance of illegal capacity, coordinate production capacity and supply, and encourage large-scale coal production. Carbon enterprises merge and reorganize small and medium-sized enterprises. In recent years, "eliminating production capacity" has become the "keyword" of coal industry. In 2018, according to the implementation of the quantitative indicators of the "Government Work Report" published by the State Council, the original planned withdrawal of coal production capacity in 2018 was about 150 million tons, and the actual completion of 270 million tons. Since 2016, the coal industry has withdrawn from the backward production capacity of 810 million tons, fulfilling the 13th Five-Year Plan ahead of schedule.

Journalists learned that China started coal production work as early as 2016. According to the requirements of the State Council, starting in 2016, it will take three to five years to withdraw 500 million tons of coal production capacity and restructure about 500 million tons of reduction. The statistics show that the total profit of Coal Enterprises above the scale increased by 290.5% in 2017 and 223.6% in 2016. Before that, from 2013 to 2015, the coal industry continued to be depressed, with the total profits of enterprises declining by 44%-65% year on year for three consecutive years.

2018 is the third year of coal "de-productivity", and the industry profit has increased for the third consecutive year. According to data released by China Coal Industry Association, in 2018, the profits of Coal Enterprises above the national scale reached 288.82 billion yuan, an increase of 5.2% over the same period of last year. The total profit of 90 large enterprises (including non-coal) was 156.3 billion yuan, an increase of 26.7% over the same period last year. In 2018, China's coal industry can maintain a steady trend of operation. Coal industry analyst Mr. Jia pointed out to the correspondent of China Industry News that on the one hand, China's supply-side structural reform is constantly deepening. On the other hand, it benefits from the development of the coal industry itself. Specifically, China's coal industry openness and cooperation to accelerate orderly progress; coal enterprise development mode has been effectively improved and new and old kinetic energy conversion. Jiang Zhimin, vice chairman of the China Coal Industry Association, said that the main objective of coal deactivation in the 13th Five-Year Plan has been basically completed. The annual output of coal mines under 300,000 tons has been reduced to 220 million tons per year. Next, the coal industry will shift from total capacity to systematic capacity and structural capacity.

Journalist noted that with the coal industry "turning into a new stage of structural capacity removal and systematic high-quality capacity", preventing excess capacity resumption is still the primary task put forward in "Key Points of Work".

The Key Points of Work emphasizes that we should resolutely prevent the resurgence of the withdrawn capacity and ensure that all kinds of problems found in financial and auditing inspections are corrected in place. Consolidate the achievements of illegal construction of coal mines and further standardize the order of production and construction. We will move to a new stage of structural capacity removal and systematic high-quality capacity, further improve the quality of staff placement and asset and debt disposal, and accelerate enterprise reform and restructuring, industrial restructuring, layout optimization, transformation and upgrading to achieve substantive progress.

Jing Wenjuan, an information analyst at Zhuo Chuang, told China Business News that in 2018, we should focus on structural optimization of production capacity, accelerate the construction of advanced production capacity, expand high-quality increments and constantly improve the quality of coal supply system. In 2019, we will continue to work steadily to eliminate backward production capacity and increase high-quality production capacity.

"Structural production capacity removal, systematic high-yield" will be of great significance to the development of the coal industry, Mr. Jia said, first of all, the relationship between supply and demand of coal will be further stabilized, which is conducive to the stabilization of coal prices. Secondly, the structure of the coal industry will be optimized and the degree of industrial concentration will be further improved. In addition, it can effectively improve the utilization rate of coal industry resources. After the optimization of coal industry structure, mineral resources development will gradually concentrate on medium-sized and large-scale, strong and high-quality mineral resources. Although coal production capacity has slowed down, the utilization rate of resources will increase significantly. At the same time, the quality of mineral resources will be improved accordingly, thus effectively strengthening the core competitiveness of coal mining enterprises.

According to the study report of China Mining (Beijing) on the economic prosperity index of China's coal industry (hereinafter referred to as the "research report"), China has solved nearly 700 million tons of excess coal production capacity, and the problem of excess coal production capacity has basically been solved.

Yue Fubin, president of China Coal Economic Research Institute, pointed out that it was not easy for China's coal industry to continue its steady operation because of the slowdown of world economic growth last year. In 2019, the situation of the coal industry is stable, but stable and changeable, which deserves our attention.

Coal guarantee enters the "construction blueprint" of the coal industry again. In 2018, China's raw coal production increased, while imports also increased synchronously. According to relevant statistics, the net import of coal in 2018 was 276 million tons, an increase of 5.2% over the same period last year, the highest level in the past four years. According to Jing Wenjuan's analysis, the policy has been effective and the coal supply has continued to grow. In 2018, China's coal output was 36.8 tons, an increase of 6.8% over the same period last year. Since China's coal industry has lost capacity, a great change in the coal industry is that the focus of production is gradually concentrated in Shanxi, Shaanxi and Inner Mongolia. In 2018, the three provinces and regions produced 2.4 billion tons of coal, accounting for 69% of the country's coal output.