Shanxi eliminates outdated coking coal production capacities

After the integration of its coal industry, Shanxi, the traditional resources province, will start a new round of upgrades and reforms of the coking coal industry, aimed at establishing a foundation for the development of the coal chemical industry, according to report on June 4 from the Economic Information Newspaper.

Over the next four years, Shanxi will eliminate coking coal production capacities of 40 million tons in small factories.

The number of individual coking coal companies will be reduced by 75 percent, while the annual average production capacity of coking coal companies will be increased four-fold.

By the end of 2013, the province will form four coking coal industrial parks with three huge companies, each with an annual production capacity of 10 million tons, and another 10 companies with annual production capacities of 5 million tons.

Shanxi province's market share of coking coal has shrunk in recent years. Since 2009, prices and exports of coking coal have decreased.

In the first quarter this year, Shanxi's output of coking coal dropped 3.8 percent compared to last year and prices fell 30 to 50 yuan a ton.

After the past few years' integration of the coal industry in Shanxi, many small-scale coal mines have closed. As a result, many private-owned coking coal companies have no suppliers of coal with relative lower prices.

Because of rising cost and shrinking demand, many private coking coal companies are losing profits.

In 2011, the whole coking coal industry in Shanxi had a net deficit of 1.28 billion yuan ($159 million) .

Industrial insiders said coking coal consumption will reduce further as big steel producers are equipped with coking coal production facilities.