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Jump in coal prices brings uncertainty


12-02-2016 02:17 BJT

China had retired 250 million tons of coal production capacity by the end of October, meeting its full-year goals ahead of schedule.

But on-demand coal mines are trying to understand what the capacity cut and price changes will mean for them.

Right back on the chopping block....

China has reiterated its stance on cutting excess coal capacity.

However, the shrink is starting to have an opposite effect, stimulating market demand in some areas in the country.

One coal mine company in Shanxi Province says its number of vehicles has doubled within the year due to rising demand and prices.

"In March, we had around 100 vehicles to carry coal. The coal did not sell well at that time. But now, the number of vehicles have increased to 200, and even then it's still not enough." said Hu Xuemin,coal worker in Shangxi.

Coal prices in that company now has almost reached 6-hundred yuan per ton, about three times the price in March.

The rising prices have also triggered worries in the market, and to some extent, shaken the resolve of some local enterprises.

Authorities say though the price volatility helped increase payments to coal companies to a certain extent, it does not indicate a long-term trend.

"Our enterprises don’t expect a huge increase in coal price. We cannot afford the high costs as a result of high coal prices. It is better to have a sustained and stable price." said Zhang Yi ,coal company staffer in Shangxi.

In the next three to five years, China will cut 500 million tons of coal capacity, and consolidate another 500 million tons into the hands of fewer but more efficient mine operators.

Resettling workers will be a top priority, and coal producers are set to offer compensation to redundant workers.

Authorities also plan to hand out unemployment benefits to those who are laid off.

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