China's coal industry says times are hard, outlook worse

BEIJING Thu Jul 24, 2014 7:54am EDT

BEIJING (Reuters) - More than 70 percent of China's coal firms are making losses, the head of the coal industry association said on Thursday, with prices eroded by falling demand growth, a worsening supply glut and a war on smog.

Wang Xianzheng, the chairman of the China Coal Industry Association, told an industry forum that the problems facing the coal sector were expected to get worse, official news agency Xinhua reported.

Wang said the problems had been piling up for the sector since the second half of 2012, with slowing consumption growth unable to absorb sustained capacity increases, especially in the face of rising imports.

He added that more than half of Chinese coal enterprises were now struggling to pay the wages of their workers.

As part of its war on pollution, China has been trying to reduce the share of coal in its overall energy mix. It has vowed to cap total production capacity at 4.1 billion tonnes by 2015, and has been closing coal-fired power plants in smog-hit regions like Beijing.

Total raw coal production reached 1.85 billion tonnes in the first six months of the year, down 1.8 percent compared to the same period of last year, according to data from the National Bureau of Statistics.

However, while authorities have worked to shut hundreds of small, unsafe and inefficient mines, many new large-scale mines are still being built, and analysts expect total annual production capacity to reach as high as 4.7 billion tonnes by the end of next year.

At a separate news briefing on Thursday, Huang Libin of the Ministry of Industry and Information Technology said coal was one of China's worst-performing sectors this year, along with steel and nonferrous metals. He said profits in the sector fell 43.9 percent in the first five months.

(Reporting by David Stanway, editing by William Hardy)

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