* China power generation drops 0.2 pct in 2015
* Coal drops 3.5 pct in 2015, steel down 2.3 pct
* Overcapacity problems exposed as demand wanes
(Recasts to include steel and coal, adds quotes)
By David Stanway
BEIJING, Jan 19 China's output of electric power
and steel fell for the first time in decades in 2015, while coal
production dropped for a second year in row, illustrating how a
slowing economy and shift to consumer-led growth is hurting
China's economy grew at its weakest pace in a quarter of a
century in 2015 and efforts to restructure have not only slashed
demand but also exposed massive overcapacity in industrial
sectors such as coal, steel and power.
Only crude oil escaped the downturn, with refinery
throughput hitting a new record in December and rising 3.8
percent to 10.44 million barrels per day in the year, data from
the National Bureau of Statistics showed on Tuesday.
"Because steel mills are cutting production, it cuts demand
for coal and power, and coal is also hit by falling power and
cement demand. It is going to be really bad for the next five
years," said Xu Zhongbo, a steel industry consultant.
China generated 5.618 trillion kilowatt-hours (kWh) of power
in 2015, down 0.2 percent from the previous year, the data
showed, the first annual decline since 1968, when the country's
economy was rocked by the turmoil of the Cultural Revolution.
"China's economic growth has decoupled from coal-fired power
generation, and the increase in the service industry as a share
of China's GDP has also slowed demand," said Yang Fuqiang, a
senior researcher at the Natural Resources Defense Council.
Yang said he expected the sector to grow at a much slower
pace until 2050 as China embarks on "energy transition", and
with a thermal power capacity surplus already estimated at
around 200 gigawatts, China needed to stop approving new plants.
"TOO MANY APARTMENTS"
Crude steel production dropped 2.3 percent to 803.8 million
tonnes, the first yearly fall since 1981, with the entire sector
sapped by weak demand and a colossal supply glut.
Around half of China's steel mills are making losses and
many are struggling to exit from a sector with a capacity
surplus of around 400 million tonnes a year, half of total
A slowdown in construction also hurt the energy intensive
cement industry, slashing output by 4.9 percent in 2015 and
creating further knock-on effects for coal and power.
"Steel production will continue decreasing this year,
especially construction steel - there are just too many
apartments and many cities just don't need to build anymore,"
With coal output declining 3.5 percent in 2015, the second
annual fall in a row, pressure on the sector is expected to
persist into 2016, also hit by Beijing's efforts to encourage
cleaner forms of energy. China is also struggling to tackle a
capacity surplus amounting to around 2 billion tonnes a year.
As China fights pollution, coal-fired power sources have
been affected disproportionately by the slowdown, with a huge
power capacity surplus allowing grids to give priority to
cleaner sources of energy, including hydropower.
Total thermal power generation in 2015 fell 2.8 percent to
4.21 trillion kWh, while hydropower rose 4.2 percent to 996
billion kWh in 2015. Utilisation rates at thermal power plants
stood at a record low in 2015 and estimates suggest that there
was a capacity surplus of as much as 200 gigawatts (GW).
Official energy administration data showed on Friday that
China's total installed power generation capacity rose 10.4
percent in 2015 to 1,506.7 GW. Thermal power capacity rose 7.8
percent to 990.2 GW over the period, amounting to 65.7 percent
of the total.
(Additional reporting by Kathy Chen and Adam Rose in Beijing
and Ruby Lian in Shanghai; Editing by Ed Davies)