China puts halt on all small coal projects

China will no longer grant permission for new coal mining projects with designed annual capacities of below 300,000 metric tons, as authorities plan to take more steps to trim excess capacity in the sector, top industry officials said on Tuesday.

The National Energy Administration has announced detailed guidelines for the coal sector including production control, project approval, capacity management and structural reform.

According to the guidelines, no new coal mining projects will be permitted in the eastern parts of the country for an unspecified period of time.

In the western regions, the government will focus more on enhancing exploration of resources and protecting the environment, steps that could trigger several new investment opportunities, the officials said.

To meet China's coal demand, especially from large-scale power projects and coal chemical firms, the government will build more new projects in the western provinces and regions, in addition to the existing production capacities.

"The guidelines, which outline the path for future development, will help improve the coal industry," said Dai Bing, director of the coal industry information department at JYD Online Corp, a Beijing-based bulk commodity consultancy.

The State Council has been trying to improve the country's energy structure with less coal and more renewables, he said.

"The coal industry concentration will trigger more reforms," Dai said.

The goal to eliminate capacities of less than 300,000 tons is not hard to achieve because big coal producing areas like Shanxi and Shaanxi provinces have already shut the door on small mining projects and turned to large-scale projects, he said.

The government will further strengthen the overall management of the sector with other measures, including plans to eliminate excess production.

The guidelines come at a time when China is grappling with slower economic growth and weakening demand for coal, said industry experts.

Domestic coal companies have seen demand waning, prices falling and higher imports in the past two years, all of which have contributed to the woes of coal producers.

More than 70 percent of the coal companies in China were in the red at the end of the third quarter of the year, said a report published by the China Coal Industry Association.

Wang Xianzheng, chairman of the association, said more than half of the coal enterprises are struggling to pay salaries.

China has vowed to cap total production capacity at 4.1 billion tons by 2015, and has been closing coal-fired power plants in smog-hit regions like Beijing.

The country's net coal imports were 220 million tons during the first nine months, down 6.2 percent compared with the same period last year.

Coal exports during the first nine months were 4.37 million tons, a 26.1 percent year-on-year drop, according to customs data.