Shanxi produces more than 70 per cent of China’s coal and coke, and 40 per cent of the nation’s electric power.
Shanxi provincial data indicates that the first three quarters of this year the industry had reached at least the same growth rate as in the past three years. However, since early November this year, more than 8,000 small and medium sized coal companies have shut down within the province.
The electric power companies have lost nearly 3.6 billion yuan (approximately US$ 527 million). According to Hong Kong’s Ta Kung Pao newspaper, six coal mines with an annual production of more than three million tons of coal have stopped production, more than 60 small and medium sized coal washing plants shut down, and more than a dozen coking companies reduced production in Shanxi’s Gujiao City.
Economist He Qinglian Analyzes the Crisis
“The coal industry reflects the severity of the overall economic structural problems in China. The real estate industry during the past few years has led to the overheating of material industries such as steel. Shanxi Province produces coal, coke, and iron. It is called the West Delta Economic Zone. Now, one-third of the steel production in China is suspended, and the remaining two-thirds will be cutting back. The demand for coke is plummeting. Shanxi’s coke industry is no doubt taking the biggest hit. So are private coal mines.”
Experts warned that currently the Shanxi coke industry can only sustain a loss for two more months. Without an economic support policy, Shanxi’s coke industry will be wiped out.
He Qinglian commented, “When a local industry’s crisis has grown so severe, there’s no way the local government can effectively step in. Additionally, who is going to buy the coke? I don’t think the Chinese government has the capability to create such a demand to cause people to buy coke and store it at home. I don’t think this is something the government could do.”
Shanxi China News reported a Shanxi Coke Industry Association consultant, Mr. Yu Changbin, estimated that over 100,000 workers in Shanxi have lost their jobs.
Cai Chongguo of the China Labor Bulletin commented, “With such a crisis, it actually could serve as an opportunity to adjust China’s economic development. The process is going to be painful. All levels in the society will share the pain. However, it is critical not to shed all the pain on the workers and peasants, and allow the employers and the officials to be pain-free.”
Shanxi’s Taiyuan Evening News reported that the coal market has obviously suffered its coldest September this year: The largest export transportation facility, Qinhuangdao, has a mountain of nine million tons of coal heaped at the harbor. The coal price has also dropped; especially metallurgical coal and coke have dropped more than 300 yuan per ton. In order to deal with falling demand, Shanxi provincial authorities will reduce coal production and exports are expected to decrease 10 percent.