China Coal Industry Plagued by Overcapacity Despite Price Rebound

The supply-demand mismatch in China's coal industry has not seen a substantial change despite prices rebounding this year, an industry association said. "There are still many uncertainties in the coal market, and we should not be blindly optimistic," head of the China National Coal Association Wang Xianzheng said. 

    The cautious tone came as coal prices have risen in recent months amid a government campaign to cut ineffective production. The price increase has seen some local governments and companies wavering in their efforts to cut capacity, according to China's (Xinhua) News Agency.

    The Bohai-Rim Steam-Coal Price Index, a benchmark index, stood at 554 yuan about (83 US dollars) per tone by September 21, a price increase of 49.3% since the beginning of the year. But with coal demand set to retreat amid government efforts to consume cleaner energy, the struggles in the industry will continue, Wang said.  By the end of July, China's major coal producers had 3.66 trillion yuan of debts, up 4.7% year on year. 

    China is the world's largest consumer of coal. The industry has long been plagued by overcapacity and has felt the pinch more over the past two years as the economy cooled and demand fell. During the first eight months of the year, China's coal output fell 10.2% year on year to 2.18 billion tones. But official data also shows that as of the end of July, China had only achieved 38% of its coal cutting targets.