As of the end of September this year, China has eliminated a total of more than 200 million mt of coal production capacity, equivalent to over 80 percent of its backward capacity elimination target for the coal sector in the current year, according to the China Coal Transport and Distribution Association (CCTDA).
According to the CCTDA, as China pushes forward its capacity cuts and supply-side reforms, each local government has stepped up efforts to cut overcapacity in the coal sector. As of September 30, overall domestic inventory of coal in China was down 15.2 percent year on year. The approach of the cold winter weather as well as higher transportation costs have provided support for coal prices in China, all of which buoyed up coal prices in China. Meanwhile, the long-term oversupply in the Chinese coal market is not expected to change. In the January-September period this year, the average Bohai-Rim Steam-Coal Price Index, a government-backed gauge of coal prices in northern China's major coal ports, was at RMB 424.7/mt ($62.73/mt) compared to RMB 442/mt in the same period last year. To date this year, although some coal enterprises in China have broken even or recorded profit, most have recorded losses. It will still take years for China’s coal enterprises to make up for losses caused by the overcapacity of recent years. In the long run, China will continue to focus on capacity cuts as its priority in the steel industry and coal sector amid domestic policy on supply-side reform, the CCTDA stated.