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Coal companies still losing despite soaring prices

Reporter: Hu Chao 丨 CCTV.com

12-02-2016 16:21 BJT

The price of coal has been climbing since August after years of decline. China's sluggish coal market had made survival difficult for many companies in the sector.

Many now wonder if rising prices can reverse the trend, and China's policy of cutting over-capacity will continue. Our reporter Hu Chao has this report from north China’s Shanxi Province, a major coal production area.

It’s early November. At a coal mine in the city of Yangquan in north China’s Shanxi Province, coal trucks were busy loading their cargo. The price of coal was 560 yuan per ton, nearly triple the price in March. Coal workers see some hope in improving market conditions.

“Look, the price of power coal per ton was 185 yuan in March. And that was up to 540 yuan by October. The price has soared since August.”said Zhang Yi,manager of a coal company in Yangquan,Shanxi province.

Many coal workers say coal supply is running short. The number of transport trucks at their coal mine has doubled.

“There were only about a hundred transport trucks here in March. Now we have over two hundred trucks. And the supply is quite tight.”said Hu Xuemin,a coal worker from a coal company in Yangquan,Shanxi province.

Statistics from the China Coal Transportation and Sales Society show that the price of power coal has increased by about 84 percent since the beginning of this year.

Experts say the price increase is a result of short supply, which is the result of the country’s policy of cutting over-capacity.

"Coal consumption has been increasing since August as demand for power and heating rises. Meanwhile,China has begun supply-side reform. Coal production was cut by limiting working days to 276 a year. That has created a big difference between demand and supply." said Qu Jianwu,director of China(Taiyuan) Coal Transaction Center

But so far, the price rise hasn’t helped coal companies recover from the heavy losses they incurred. Experts say most coal companies are still suffering deficits. Wages and social insurance for workers remain unpaid.

“The cost price of coal is up to 300 yuan, including the cost of management, sales and tax. We might make some profit in several months. But that won’t make up the big losses accumulated over the years.” said Yang Jinniu,manager of the coal company in Yangquan,Shanxi province.

In fact, many coal companies feel anxious about soaring prices, which also leads to higher costs in the supply chain.

“We once suffered big losses after coal prices plunged. We hope coal prices can stay stable rather than swinging.”said Zhang Yi.

Soaring coal prices don’t mean the end of cutting over-capacity. The National Development and Reform Commission says its resolve to cut capacity will not be weakened. The policy will continue to help the market achieve balance and help the coal industry achieve healthy development.

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