Optimizing production capacity and stabilizing foundation to promote development

2019 marks the 70th anniversary of the founding of the people's Republic of China, and the coal industry continues to push forward. In this year, the internal and external challenges of the coal industry are intertwined, the supply side structural reform has entered a new stage, and the economic operation is steady, and the coal miners are constantly exploring the road of high-quality development, so as to inject energy power into the national economic development. In 2019, the coal industry will earnestly implement the decision-making and deployment of the Party Central Committee and the State Council, adhere to the general tone of seeking progress in stability, and take the supply side structural reform as the main line to promote high-quality development. According to the notice issued by the national development and Reform Commission in May this year, since 2016, China has withdrawn 810 million tons of backward coal production capacity and completed the target task of "13th five year plan" capacity reduction two years in advance; in 2019, the structural reform of the coal supply side "comprehensively turned into a new stage of structural capacity reduction and systematic capacity optimization". According to the statistics of China Coal Industry Association, by the end of 2018, the number of coal mines across the country has decreased from more than 10000 by the end of 2014 to about 5800.

Backward production capacity was exited quickly and high-quality production capacity was released continuously. According to the national energy work conference held recently, in 2019, China closed more than 450 backward coal mines and over fulfilled the target of capacity reduction; the annual production capacity of 1.2 million tons and over coal mines reached three quarters of the total production capacity, further concentrating on resource rich areas. According to the data from the National Bureau of statistics and the General Administration of customs, in the first 11 months of this year, the national raw coal output was 3.41 billion tons, an increase of 4.5% year on year; the national imported coal was 299296000 tons, an increase of 10.2% year on year. In addition, with the promotion and opening of a number of special railway transportation capacity, such as Daqin line, Mengji line, Shuohuang line, Wari line and Haoji line, the bottleneck of coal transportation nationwide is gradually lifted. The price "green" market is increasing in terms of stable output, import volume and transportation capacity. The overall supply and guarantee capacity of coal is greatly enhanced, while the growth rate of coal consumption is slowing down. In 2018, China's total energy consumption increased by 3.3% year-on-year, while coal consumption increased by 1.0% year-on-year, and the proportion of total energy consumption fell to less than 60% for the first time. In the first 10 months of this year, China's coal consumption increased only 0.8% year on year.

In the past three years, the annual output of coal has continued to grow positively, and the market price has been kept in a green range due to the "stabilizing" effect of medium and long-term contracts and "benchmark + floating price" pricing mechanism. In particular, the medium and long-term contract price has been stable between 550 yuan and 570 yuan per ton for three years. In 2019, more than 70% of the electricity and coal contracts are signed by China long term association, and the performance rate in the first three quarters is more than 90%. Under the background of stable operation of the coal market, the executive meeting of the State Council held in September this year decided to cancel the linkage mechanism of coal-fired power price from January 1, 2020 for the coal-fired power generation that has not yet achieved market-oriented trading. China bid farewell to the implementation of the coal and electricity price linkage mechanism for 15 years. Statistics from China Coal Industry Association show that since the fourth quarter of this year, the market demand has slowed down, the supply of domestic coal market has shifted to a loose direction, the overall coal storage of the whole society is at a high level, and the market is weak. The head of China Coal Industry Association has repeatedly said that at present and in the future, the total coal surplus will become the normal. With the accelerated release of new coal production capacity, downward pressure on the market has emerged. Coal enterprises should follow the market law and organize production according to market demand. In 2019, the reform of benefit differentiation will be deepened, the supply side structural reform of the coal industry will be further promoted, and the high-quality production capacity will continue to increase. However, with the reform into the deep-water area, there are still many problems left over by the history of state-owned enterprises and other factors, the phenomenon of benefit differentiation in the coal industry is more and more obvious.

According to the data of China Coal Industry Association, in the first three quarters of this year, the total profit of Coal Enterprises above Designated Size in China was 216.5 billion yuan, down 3.2% year-on-year, while the total profit of 90 large coal enterprises (including non coal) in the first nine months was 124.47 billion yuan, up 3.8% year-on-year. According to the National Bureau of statistics, in the first 11 months of this year, the total profits of Coal Enterprises above Designated Size reached 266.27 billion yuan, down 1.7% year on year. At present, the tide of intelligence is in the ascendant, and 183 intelligent coal faces have been built in 152 coal mines across the country. However, the gap between the enterprises with backward technology and equipment and the advanced enterprises is widening. There are many coal enterprises in the low profit and profit balance point, so deepening the reform is an inevitable choice. SASAC recently held a meeting of heads of state-owned enterprises, which revealed that the three-year action plan for SOE reform will be put into effect at the beginning of next year, taking this opportunity to promote SOE reform to achieve new breakthroughs. SASAC has made it clear that the regional integration of coal and power resources will become the focus of work next year. Generally speaking, the coal industry is still in the period of structural adjustment, and the high-quality supply system has not been fully established. Efforts should be made to consolidate the results of capacity reduction, speed up the clearance of "zombie enterprises", make overall arrangements for the placement of employees, debt disposal, etc.; promote coal power joint venture, merger and reorganization, and accelerate the transformation of new and old driving forces in the coal industry. In accordance with the requirements of the national energy work conference, we should stabilize the foundation, optimize production capacity, effectively guarantee the bottom line of coal, and continue to do a good job in the clean and efficient utilization of coal.