BEIJING: Inner Mongolia, China’s biggest coal producing region, cut its output of the commodity by just over 10 percent in the first seven months of the year as part of its efforts to close 3.3 million tonnes of capacity this year.
By the end of August, the region had shut seven coal mines, Wang Binjun, the director of Inner Mongolia’s Economic and Information Commission, was cited as saying by local state media. The region plans to close a total of 65 mines by 2020 to curb crippling overcapacity in the sector.
Authorities have allotted output cuts to ten companies, who will be responsible for implementing the cuts by the end of October to help the region meet its capacity reduction target for the year, an official document released by the Coal Industrial Bureau (CIB) of Inner Mongolia said last week.
Coal companies in the region have posted a combined loss of 4 billion yuan ($600.41 million) in the first half, up 17 percent year-on-year, due to the supply glut caused by China’s economic slowdown, according to the CIB.
Inner Mongolia’s first-half production dropped 10.4 percent, said the CIB, bringing down the raw coal production to 407 million tonnes, or 25 percent of the nation’s total.
Even so, China has been struggling to meet its November deadline to complete this year’s capacity reduction target of 250 million tonnes with provinces worrying about hurting jobs.
Apart from coal, China is also struggling with overcapacity in its steel sector. Inner Mongolia plans to cut its output of the alloy by 2.91 million tonnes this year, Wang added.
China plans to allocate 100 billion yuan to help local authorities and state-owned firms finance layoffs in the steel and coal sectors this year and in 2017, with 20 percent of the total used to reward high achievers.
China’s southeast province Jiangxi aims to cut 18.7 million tonnes of coal production by 2020, a regional financial body said on Friday as it pledged 1.6 billion yuan in funding to its coal companies.
Supply cuts have fueled a price rally in China. High-quality thermal coal has risen to 490 yuan per tonne, up 120 yuan from the start of the year, according to the China Taiyuan Coal Transaction Center.