Coal output slashed in Ordos

By Liang Fei Source:Global Times Published: 2013-5-8 22:38:01

China is witnessing another round of coal mine production cuts. Nearly half the coal mines in Ordos, North China's Inner Mongolia Autonomous Region have cut production because coal prices have fallen to a near three-year low, industry insiders said Wednesday.

Han Jian, a 30-year-old businessman who runs a coal mine in the city, told the Global Times Wednesday by phone that his mine has cut production by 70 to 80 percent compared with last year's output.

Some small coal mines in the region have even halted production, and only big ones such as China Shenhua Energy Co are still in operation, media reports said.

Ordos produced 597 million tons of coal in 2012, accounting for over 16 percent of China's total coal production, the 21st Century Business Herald newspaper reported Wednesday.

Coal prices have been falling since the beginning of this year. Currently quality thermal coal is priced at around 650 yuan ($106) per ton, a 20 percent drop compared with the same period last year.

"I think the major reason behind the sluggish market is the slow economic recovery," said Han, who explained that the growth of major coal-­consuming companies is losing momentum amid the overall slower economic growth.

Ordos, one of the richest cities in North China, is seeing tougher times as two of its pillar industries - real estate and resources - have stopped booming.

"The occupancy rate of my hotel has dropped over 50 percent compared with the good old days in 2009 and 2010, when everything was still booming here," an employee surnamed Wang at a local Jinjiang Inn hotel chain told the Global Times Wednesday.

Ordos is not the only place to suffer from the sluggish market, which has also hit other coal-producing regions such as Shanxi and Shaanxi provinces.

"Our company has to cut prices in order to guarantee sales," Jiao Huijiao, who works at a State-owned coal mine in Changzhi, North China's Shanxi Province, told the Global Times Wednesday.

"Our products are sold at around 500 yuan per ton at present, far less than the price of over 800 yuan per ton a few years ago," she said.

In 2011, China's coal market saw the end of a 10-year golden period. Last year, many coal mines were already cutting production in order to survive.

Mu Wenxi, an analyst at commodities portal Umetal, told the Global Times Wednesday that there will be an obvious overcapacity in the coal sector as the growth in demand slows.

Domestic coal producers are also facing competition from imported coal from countries such as Australia, which has offered much lower prices, according to Mu. "I think the market will continue to be sluggish in the near future."

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