Shanxi province, which has coal reserves accounting for a quarter of China's total, aims to update its coal mines while continuing to reduce capacity in 2017.
"Capacity reduction involves two parts: getting rid of outdated capacity and adding high-performance capacity," said Liang Jinghua, director of the research department of the general office of the provincial government.
The current way of coal exploitation is highly wasteful. Statistics show that for every metric ton of coal, eight tons of minerals, such as bauxite, pyrite, kaoline and fire clay, are used.
The central government has recently approved Shanxi's plan for installing advanced capacity of 122.8 million tons per year in 18 existing mines in the province. By the end of the year, the advanced capacity will account for 16.9 percent of the total capacity, compared with the current 10 percent.
By the end of 2020, 150 modern mines will be built, featuring green excavation and unmanned operation.
Coal products are becoming more technology intensive. For instance, Shanxi Jincheng Anthracite Mining Group Co Ltd, together with South China Agricultural University, has developed one technology to extract liquid fertilizer from coal. The fertilizer, which is 100 percent soluble in water, is able to change its ingredients accurately according to the needs of the plant. Moreover, it is absorbed three times easier than ordinary fertilizer.
In 2015, Jincheng Anthracite Mining Group exported 146,600 tons of liquid fertilizer, or the equivalent of 83,000 tons of coal, to countries such as the United States and Australia.
Lu'an Group is pushing forward with coal-based fine chemicals technology. Its high-end wax has been exported to more than 10 countries and regions in North America, Europe, Southeast Asia, Japan and South Korea. Its environment-friendly solvent oil has been exported to international cosmetics companies such as L'Oreal and Unilever. Its high-end lubricant has increased the working life in diesel motors from 20,000 kilometers to 60,000 kilometers.
Progress gained n capacity reduction was made in 2016. According to Xiang Erniu, director of the department of coal industry of the province, Shanxi had closed all the 25 mines as of Oct 31 that were set to be closed at the start of the year. By the end of the year, 23.25 million tons of capacity had been eliminated.
"As of November, the reduction in the province accounted for 39 percent of the reduced capacity throughout the country," said Xiang.
Wang Bin, deputy governor of the province, said that 2017 will see 20 million tons of capacity cutting. By 2020, coal capacity in Shanxi will stay around 1.2 billion tons per year. The annual output will be around 1 billion tons, of which 400 million tons will be for the demand within the province and 600 million tons for demand outside the province.
Yan Shichun, deputy director of China Taiyuan Coal Transaction Center, said that coal prices will gradually fall back to a normal level this year.
"The government is formulating mechanisms that adjust coal price in times of fluctuation. Power coal price this year is going to be affected more by the macro policy than by demand and supply. Coking coal, on the other hand, is going to stay at a relatively high price level in the coming years," said Yan.
