Ordos Consolidates Coal Mines
As a June deadline to shut down all coal mines with annual production of less than 3 million tons approaches, negotiations between mining companies in the Inner Mongolian city of Ordos also nears completion.
The first round of mergers and acquisitions was launched 10 years ago. At that time there were 1,900 mines in the city, 95 percent of them were small, with output of less than 90,000 tons a year.
As in other parts of the country, the city ordered mining companies to merge in an attempt to improve safety standards and productivity, this resulted in over 1,000 small mines being forced to shut down before 2004.
The acquisitions didn't stop after 2004, however, and by the end of 2011, only 321 mines were still in operation.
The city government has now ordered a new round of mergers with the aim of reducing the number of mines to just 45 by the end of June.
The 45 firms in question were chosen for their larger annual production capacity as well as their financial health and good safety records.
The city has stipulated that each county in the city should be allowed two to three mines in order to ensure revenue for local governments via tax receipts.
To encourage acquisitions, companies that complete takeovers in the time allocated have been promised priority rights to railway use. The lack of sufficient railway infrastructure in the region means that many mines are unable to transport their output easily.
Nationwide Reform
The EO also recently reported that six provinces will embark on similar reforms of their coal industries over the course of the next four years, following in the footsteps of regions like Shanxi, Henan, Inner Mongolia and Shaanxi all of which have already carried out major reforms.
Recently, Wu Yin (吴吟), the Deputy Director of the National Energy Administration (NEA) told the EO that the number of coal mining enterprises will be reduced from the current 8,000 to less than 4,000 by 2016, when the period covered by China's 12th Five-year plan concludes.
Competition to acquire as many mines as possible has driven the prices of target mines up from 100 million yuan each into the billions of yuan, according to one source in Ordos.
Coal prices dipped slightly after the Spring Festival in February, when the closure of many export-oriented factories in coastal China drove down the demand for electricity.
As China tightens its environmental protection measures, small coal mines, which cannot reduce costs by installing new machinery to boost production, face a tough future and will likely be better off if acquired by large buyers.
Wu also revealed that during the 12th Five-year period, Heilongjiang, Hunan, Sichuan, Guizhou, Chongqing and Yunnan will encourage more mergers and restructuring in their provincial coal sectors in order to reduce the total number of coal mining companies operating.
Wu also said that the next step in reforming the coal industry might take the "Henan model" as it's lead, though further improvements to the model will continue to be sought.
Between 2012 and 2015, large coal companies will be given priority when it comes to exploiting resources located in areas where large coal deposits are found.
Links and Sources
The Economic Observer: Another Six Provinces Join Coal Mine Reform
The first round of mergers and acquisitions was launched 10 years ago. At that time there were 1,900 mines in the city, 95 percent of them were small, with output of less than 90,000 tons a year.
As in other parts of the country, the city ordered mining companies to merge in an attempt to improve safety standards and productivity, this resulted in over 1,000 small mines being forced to shut down before 2004.
The acquisitions didn't stop after 2004, however, and by the end of 2011, only 321 mines were still in operation.
The city government has now ordered a new round of mergers with the aim of reducing the number of mines to just 45 by the end of June.
The 45 firms in question were chosen for their larger annual production capacity as well as their financial health and good safety records.
The city has stipulated that each county in the city should be allowed two to three mines in order to ensure revenue for local governments via tax receipts.
To encourage acquisitions, companies that complete takeovers in the time allocated have been promised priority rights to railway use. The lack of sufficient railway infrastructure in the region means that many mines are unable to transport their output easily.
Nationwide Reform
The EO also recently reported that six provinces will embark on similar reforms of their coal industries over the course of the next four years, following in the footsteps of regions like Shanxi, Henan, Inner Mongolia and Shaanxi all of which have already carried out major reforms.
Recently, Wu Yin (吴吟), the Deputy Director of the National Energy Administration (NEA) told the EO that the number of coal mining enterprises will be reduced from the current 8,000 to less than 4,000 by 2016, when the period covered by China's 12th Five-year plan concludes.
Competition to acquire as many mines as possible has driven the prices of target mines up from 100 million yuan each into the billions of yuan, according to one source in Ordos.
Coal prices dipped slightly after the Spring Festival in February, when the closure of many export-oriented factories in coastal China drove down the demand for electricity.
As China tightens its environmental protection measures, small coal mines, which cannot reduce costs by installing new machinery to boost production, face a tough future and will likely be better off if acquired by large buyers.
Wu also revealed that during the 12th Five-year period, Heilongjiang, Hunan, Sichuan, Guizhou, Chongqing and Yunnan will encourage more mergers and restructuring in their provincial coal sectors in order to reduce the total number of coal mining companies operating.
Wu also said that the next step in reforming the coal industry might take the "Henan model" as it's lead, though further improvements to the model will continue to be sought.
Between 2012 and 2015, large coal companies will be given priority when it comes to exploiting resources located in areas where large coal deposits are found.
Links and Sources
The Economic Observer: Another Six Provinces Join Coal Mine Reform
Thanks for the insights. Keep us posted about this matter. Thanks.
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