Slow coal demand dragging down Shanxi economy

The sluggish coal market has dragged down the economy of North China's Shanxi Province, the major coal-producing province said on Sunday.

Coal output in Shanxi had a 0.13 percent year-on-year growth to reach 219 million tons in the first quarter of this year, equal to a quarter of the country's total output, Shanxi Provincial Coal Industry Office said in a statement posted on its official website on Sunday.

Sliding coal prices had crippled the local economy, the authorities said. For the first three months, the top five coal producers saw revenues worth 36.91 billion yuan ($6 billion), down 18 percent from a year earlier, while overall coal mining revenues reached 94.7 billion yuan, down 21.3 percent year-on-year, it said.

Meanwhile, coal mining profit in the province slumped 86.6 percent year-on-year to 800 million yuan, and the industry contributed tax revenues 15 percent less compared with the same period in 2013, according to the official data.

Coal inventory on the other hand surged 87.2 percent year-on-year to 33.8 million tons by the end of March, as a result of the sluggish demand.

"The coal price plunge came earlier than expected, more abruptly and deeply, which makes it even more difficult for coal producers," it said.

Facing difficulties in the industry, the Shanxi government has recently worked out preferential policies including suspension of the reserve charges to coal producers, extension of the coal trading services fees halved, and a halt in approvals for more coal mines so as to cut production.

Shanxi is one of the resource-dependent provinces that suffered the sharpest growth slowdown in the first quarter as policymakers pledged to cut overcapacity and pollution especially in coal burning and powered sectors such as steel-producing. First-quarter economic growth was 5.5 percent in Shanxi.

North China's Inner Mongolia Autonomous Region, another major coal-producing province, also saw its provincial GDP growth sliding to 7.3 percent in the first quarter from 9.9 percent a year earlier.

The current coal price is about 530 yuan per ton, down 38 percent from November 2011, a peak price in recent years, according to the Bohai-rim coal price index, a major domestic coal index.

Downstream coal-powered sectors such as steel and cement making that are plagued by overcapacity also led to less demand for coal.

Economic growth in North China's Hebei Province, the nation's top steel-producing province, fell to 4.2 percent in the first quarter from 8.2 percent in the fourth quarter of 2013, said official data and media reports.

The Chinese government has ratcheted up efforts to rein in sectors with excessive capacity and heavy polluters, even as it has accelerated railways construction and affordable housing to fuel growth.

Pressure for environmental protection and clean energy will further slow down the overall demand for coal.

The coal supply in the country is reportedly expected to reach 3.8 billion tons for this year, with a growth rate of 2.7 percent year-on-year.

China produced 3.7 billion tons of coal, and imported a net of 320 million tons in 2013, while the domestic consumption of coal was only 3.61 billion tons, official data showed.

The country's economy grew 7.4 percent in the January-March period from a year earlier, its slowest pace in 18 months.