China To Close Down 1,000 Coal Mines

(Li Xin/AFP via Getty Images)

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Chris White Tech Reporter
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China plans on shuttering 1,000 coal mines in 2016 in hopes of puling the country’s coal industry up and out of its glutted doldrums.

On Monday the country’s National Energy Administration (NEA) posted a notice on its website announcing its decision to shut down the mines is part of an overarching plan to cut as much as 500 million tons of surplus coal production out of the market within the next five years.

China, the world’s top coal consumer, also plans on closing more than 5,600 of its 10,760 coal mines under a new policy banning annual capacity of less than 90,000 tons, the China National Coal Association has estimated.

The country promised to discontinue approving any new coal mining projects for the next three years, all in effort to dramatically cut the country’s coal production which accounted for 3.7 million tons of coal last year and a surplus of two billion tons per year.

Thermal coal at the port of Qinhuangdao ticked up 2.7 percent at $58.29 per ton, making it one bright spot in China’s coal industry this year.

Thermal’s rebound may not be enough to satisfy the country’s regulators, as the country plans on deleting new projects in areas with the biggest capacity surpluses.

Revelations unearthed last year showing China misreported how much coal it used for electricity might complicate NEA’s announcement. According to a New York Times report last November, China used 17 percent more coal for electricity than official numbers show.

“Even for a country of China’s size, the scale of the correction is immense,” The NYT reported. “The increase alone is greater than the whole German economy emits annually from fossil fuels.”

The discovery tossed a wrench in an agreement forged between President Barack Obama and Chinese President Xi Jinping in 2014 that would cut U.S. carbon emission by 26 to 28 percent by 2025, while China would limit its emissions by 2030.

U.S. coal producers have seen similar problems, thanks in large part to increased environmental regulations, glutted markets, and the widespread use of hydraulic fracturing to access natural gas.

According to a new report from policy research group Rhodium Group, the market value of U.S. coal companies has fallen far from where it was in 2011.

“The four largest US miners by output (Peabody Energy, Arch Coal, Cloud Peak Energy, and Alpha Natural Resources), which account for nearly half of US production, were worth a combined $34 billion at their peak in 2011,” the report notes. “Today they are worth $150 million.”

Alliance Coal, one of the largest coal producers in the U.S., announced Feb. 6 it will be forced to layoff 275 employees because of low natural gas prices, “overarching regulations” and glutted coal markets.

China, for its part, perhaps as a way to aid its fledgling coal industry, also plans on creating a scheme allowing coal suppliers to enter into direct power sales agreements with consumers, as well as reduce energy prices across the board to stimulate demand for coal, the regulator’s notice said.

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