Shanxi recently released its energy development strategic objectives over the next five years, which identified the province's goals on coal production.
The strategic objectives say coal output will be controlled within the limit of 1 billion tons by 2020. Outbound coal will be controlled within the limit of 600 million tons, and the province's energy consumption will be around 260 million tons of standard coal.
Also, Shenhua Group, China's biggest coal producer, will cut 10.8 percent of output and reduce 33 million tons of coal compared to 2014. Other coal giants like China Coal Energy and Datong Coal Mine Group also put out production limit plans.
"In the past two years, some large coal enterprises cut prices in order to improve sales volume, though there was a glut in the coal market, falling into a vicious circle," analyzed an insider of the Shanxi coal industry.
Actually, coal prices saw a downward trend as early as in 2011.
Coal production rise, which has already lasted 14 years, did not stop until 2014. In the past year, national raw coal output was 3.87 billion tons, down 2.5 percent year-on-year, according to the National Bureau of Statistics.
The coal industry encountered restrictions due to environmental policies. This is especially acute due to a huge issue in modern China, smog, which has aroused public self-examination over China's energy consumption structure that relies mainly on coal.
Restraints from both markets and the environment have led China, who once produced and consumed the most coal in the world, into an era of coal control.
A document jointly released by six national ministries and commissions at the end of 2014 pointed out that in order to prevent and control air pollution, coal consumption in the regions of Beijing, Tianjin, Hebei and Shandong province should be reduced by 83 million tons in 2017, compared with 2012. In the following two years, the whole country will cut coal consumption by at least 160 million tons.
"Even though production will no longer increase, the oversupply in the coal market is difficult to resolve," said by Pan Yun, deputy head of the Shanxi Academy of Social Science.
He accounted this situation to two reasons. First, the speed of economic growth is slowing down. On the other hand, the control over energy conservation and emissions reduction is increasingly strict. The proportion of hydropower and natural gas in energy consumption continues to grow.
In addition to strict implementation of policy on coal production control, Pan suggested the authorities should strengthen coordination among the major coal production areas in order to avoid cut-throat competition.
Edited by Michael Thai
