Change in Coal Production Needs to Consider the Downside Risk of Demand

According to China Electric Power Daily, recently, the Coal Industry Planning and Design Institute issued the implementation report "Mid-term Assessment and Late Prospect of Coal Control in the 13th Five-Year Plan" of China Coal Industry, suggesting that coal production should consider the downside risks of coal demand. Under the conditions of complex and severe external economic environment and increasing environmental constraints such as carbon emission intensity, and with the rapid development of renewable energy and clean energy, such as nuclear power and other alternative role, energy consumption and production structure are further changed. In the second half of the 13th Five-Year Plan, the rising trend of coal consumption may be narrowed or even there is a possibility of decline.

The report points out that controlling total coal consumption and optimizing energy structure are important measures to improve environmental quality and achieve green development. Since the 13th Five-Year Plan, China has continuously promoted coal control and achieved good results. The proportion of coal output and consumption in the energy structure will gradually decrease in the later period of the 13th Five-Year Plan. "The proportion of coal in primary energy output decreased from 78.2% in 2015 to 69.7% in 2018, and the proportion of coal in total energy consumption decreased from 68.1% in 2015 to 59.0% in 2018. The proportion of coal in energy production and consumption structure decreased year by year."

In terms of scientific productivity, in the early and middle period of the 13th Five-Year Plan, with the gradual elimination of backward coal productivity and the continuous release of high-quality productivity, the safety index, high-efficiency index and green index of coal enterprises in the whole country show a certain increase and are higher than those of coal control scenarios. The proportion of scientific productivity and the average score of scientific productivity also increase year by year and are higher than those of coal control scenarios.

From the point of view of coal output, the coal output was significantly reduced from 2016 to 2017, and the coal output did not exceed the coal control scenario output, thus completing the coal control scenario index. Coal production in 2018 was driven by the centralized development layout, high-quality production capacity release and downstream consumption growth. For the first time, raw coal production exceeded the coal control scenario. Overall, the coal control project achieved remarkable results in the mid-13th Five-Year Plan period. The proportion of coal in the energy production and consumption structure decreased year by year, the proportion and score of coal scientific productivity increased year by year, and the number of safety accidents and deaths in the industry decreased year by year. Wu Lixin, President of Strategic Planning Institute of Coal Industry Planning and Design Research Institute, said. It is worth noting that the report suggests that coal production should consider the downside risks of coal demand. Under the conditions of complex and severe external economic environment and increasing environmental constraints such as carbon emission intensity, and with the rapid development of renewable energy and clean energy, such as nuclear power and other alternative role, energy consumption and production structure are further changed. In the second half of the 13th Five-Year Plan, the rising trend of coal consumption may be narrowed or even there is a possibility of decline.

The release of high-quality coal production capacity and the improvement of transportation channels will lead to the overcapacity of coal as a normal state, and the coal industry may face more serious problems. The report points out that coal enterprises and industries should put forward strategic plans for the downward scenario of coal output.

For coal enterprises, first of all, under the current situation of stable development of the industry, coal enterprises should actively explore the vertical extension of the industrial chain, promote the integration of the upstream and downstream industries of coal, such as coal power, coal char, coal and steel, to form industrial effects, promote the "strong physique" of enterprises, and improve the risk resistance of coal enterprises.

Secondly, coal enterprises actively seek internal advantages, strengthen and highlight the advantages of enterprises, form new coal-based related diversified industries within enterprises, and create multiple profit points for enterprises.

Thirdly, coal enterprises should study long-term development strategy, reduce the cost of transformation, explore the horizontal industrial layout according to the technological advantages, talent advantages and regional advantages of enterprises, timely and timely transformation and upgrading, and improve the viability of enterprises.

For the coal industry at this stage, in order to cope with the possibility of downturn, the report recommends the following two attempts. First, in view of the characteristics of coal mines in various regions, taking full account of their exploitable resources reserves, service life and production capacity, we should study and formulate the withdrawal system of excess and backward production capacity, scientifically formulate withdrawal criteria, and more specifically withdraw from relatively backward production capacity.

The second is to study and formulate a comprehensive evaluation system of coal mine pollution, efficiency and coal quality. According to the comprehensive evaluation system, coal mines with corresponding problems, meeting exit criteria but potential for improvement should be temporarily shut down and urged to improve before production can be carried out. For coal mines with serious problems, low efficiency, poor coal quality and no potential for further improvement, shutdown and withdrawal should be strictly implemented to reduce the productivity of low-efficiency and low-quality coal mines.