China’s SASAC announced on March 26 that China National Coal Energy Group (China Coal Group) took over the coal asset management right of Guoyuan Times Coal Asset Management (Guoyuan Company) on March 25, worth RMB140bn with a production capacity of 280m tons, as reported by Caixin on March 26. By the end of 2019, China Coal Group had total coal assets worth RMB395.9bn and a total production capacity of 300m tons. After taking over, the group’s total coal production capacity will reach 580m tons, only next to the 600m tons of China Energy Investment Corporation (China Energy) in the country.
The coal asset management right transfer is a continuation of the adjustment of coal production capacity of central enterprises. Back in 2016, in order to eliminate the backward coal production capacity and promote the central enterprises to focus on their main responsibilities, SASAC required all coal related central enterprises except the coal electricity integrated enterprises to withdraw from the coal industry. This is mainly to solve the problems of central enterprises’ coal homogenization operation and coal related business losses. According to the disclosure of SASAC, as of the end of 2015, in addition to China Energy and China Coal Group, there were 20 central coal enterprises during the coal downward period after 2012. The 13th Five-Year Plan (FYP), from 2015 to 2020, was the peak period for the elimination of backward production capacity in the coal sector. During this period, the nation eliminated more than 1bn tons of backward coal production capacity, including 119m tons by central enterprises.
Under the situation of serious oversupply and environment pollution in the coal market, the integration and optimization of coal capacity structure can effectively maintain the balance of market supply and demand. Meanwhile, to consolidate the supply side structural reform results, large coal central enterprises should give full play to the leading role of a stable market and accelerate scientific and technological innovation, comprehensively improving resource utilization efficiency and contributing to the carbon neutrality goal. According to the annual report on the development of the coal industry in 2020 issued by China Coal Industry Association, China’s coal output reached 3.9bn tons in 2020, with a YoY increase of 1.4%. However, by the end of the 14th FYP, the figure will be limited at 4.1bn tons, and the annual coal consumption will be controlled at about 4.2bn tons. Besides, the number of coal mines in China will also need to reduce from 4,700 at the end-2020 to 4,000 by the end of the 14th FYP.