Insight

Four implications of China coal sector overcapacity

10 March 2016

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10 March 2016

Four implications of China coal sector overcapacity

Report summary

Several sectors of Chinese industry are facing overcapacity issues. The government recently announced a plan to tackle overcapacity in the domestic coal sector. The Insight discusses implications of the government action on coal markets.

Executive summary
What led to the overcapacity in the coal sector?
Four implications of overcapacity
- Mine closures: rapid elimination of excess capacity to result in large lay-offs
- Industry restructuring: larger companies to acquire smaller mines to accelerate consolidation
- Backward integration: encourage large consumers in the power, steel and chemicals space to acquire coal mines to secure long-term supplies
- Domestic protectionism: export duty removal and VAT rebate allowance to increase exports
Conclusion

Tables and charts

This report includes 6 images and tables including:

Ratio of coal production to approved capacity by province, %
No of mines and average mine-size in China
No. of mines and average mine-size in key provinces

China productivity range by mining method and comparison with Australia (raw tpey)
Domestic coal sector costs, revenue and cash flows, US$ billion
A comparison of Chinese and Australian bituminous thermal coal prices delivered into Japan, US$/t