Large investment of coal in Shanxi cools down

The coal sector in north China's Shanxi Province, one of the nation's leading coal producers, is losing its investment appeal as the province shifts to development of non-coal industries.

According to data published by the Shanxi Bureau of Coal Industry on Thursday, investments in the sector for the first half of the year were 35.55 billion yuan (5.7 million U.S. dollars), down by 11.4 percent from the previous year. Investment in non-coal sectors totaled 125.5 billion yuan, an increase of 28.1 percent year on year.

The decrease came after industry profits diminished amid falling demand.

The aggregate price of coal in Shanxi sagged to 401 yuan per tonne in the first quarter of this year, down from 656 yuan per tonne in 2011, largely due to economic downturn and excessive capacity.

"Of all the coal companies in Shanxi, a quarter are going with low profits, a quarter are going flat, another quarter is losing money, while the rest have suspended production altogether," said Li Junfeng, vice president of Puda Coal Industry Co. in Shanxi.

In major coal-producing cities like Shuozhou, Yangquan, and Datong, small- and medium-sized coal mines are shutting down due to tight budgets.

"There is a reshuffle coming for the coal industry," says Pei Xiping, manager of Shanxi Yangquan Coal Industry Co.. "Coal companies nowadays have neither the money nor the willingness to invest in coal projects."

As a result the economy of Shanxi Province, which used to be fueled by the coal industry, is undergoing fast structural transformation, says Liu Wenbin, who is in charge of the investment department of the Provincial Statistics Bureau.

"The government has focused more on fledgling industries such as manufacturing, coal chemical and photo-voltaic," Liu says.

Industries in Shanxi are becoming more diversified as the government seeks alternative forms of development, he added.

With industrial transformation high on their agenda, the government is also pushing forward the construction of traffic facilities like rail and electricity.

Shanxi province, with a coal output of 962.5688 million tonnes in 2013, is second only to north China's Inner Mongolia Autonomous Region in coal production.