25 Aug 2009 08:29

Shanxi govt urges coal producers to raise output to bolster provincial GDP

Shanghai. August 25. INTERFAX-CHINA - The Shanxi government has asked local coal producers to step up production starting in September to revive the province's economy, a provincial government official told Interfax on Aug. 24.

"The campaign to shut down small-scale coalmines has substantially affected Shanxi's coal output and its coal industry-dependent economy," an official from the Shanxi Coal Industry Bureau (SCIB), who wished to be anonymous, said.

In April, the Shanxi government implemented a coal industry policy to reduce the total number of coalmines in the province from 2,600 in 2008 to 1,000 in 2011 to improve efficiency and reduce the number of coalmine accidents in the province. A large number of coalmines have since been shut down while others were merged or acquired by larger coal producers

As such, the coal-rich province's gross domestic product shrank by 4.4 percent year-on-year to RMB 310.60 billion ($45.48 billion) in the first half of this year, while China's overall GDP grew at an annual rate of 7.1 percent. Shanxi produced about 250 million tons of coal in the first half of this year, leaving more than 40 percent of production capacity idle and allowing the Inner Mongolia Autonomous Region to surpass it as China's largest coal producing region for the period.

To bolster its economy, the local government is also pushing small-scale producers that have not been shut down, merged or acquired to expand their production capacity more quickly to meet the new government minimum output threshold of 900,000 tons per year, the official said.

"It is easier for larger, well-equipped coal firms to increase their production capacity utilization rate to some degree starting next month. But small-scale producers will need time to expand annual production capacity from less than 300,000 tons to 900,000 tons," Yu Hong, a coal industry analyst from Datong Securities, said.

If Shanxi strictly follows the new orders by the government, its coal output will only recover gradually as small-scale coalmines had contributed a large proportion of the province's coal output, Yu said.