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Coal industry faces bleak winter

By Du Juan  (China Daily)

13:21, July 19, 2012

Producers struggle as excess supply, falling demand push prices down

China's coal industry is facing a severe downturn as the national economic slowdown has led to a slump in coal demand and prices.

The Inner Mongolia autonomous region, which benefited from the rapid development of its coal industry in the past few years, is making efforts to help its coal companies cope with this challenging period.

The Inner Mongolia Chamber of Commerce in Beijing on Wednesday launched its energy branch, which is responsible for providing the region's energy companies with a platform to support their development.

Liu Yuchuan, chairman of the branch, said the platform will include a coal port in Caofeidian and an integrated coal trading system.

Up to 80 percent of the member companies in the chamber's energy branch are doing business related to coal production and trading.

The coal market has been declining since May. Coal prices dropped 20 yuan ($3) per metric ton in June, which has forced many coal producers to stop or reduce production.

"As far as I know, many coal mines in Inner Mongolia have stopped production because of the weak market," said Liu Feng, head of Baotou Zhengxing Material Co Ltd, a trading company specializing in steel and coal.

He said that the reorganization and consolidation of the coal industry was continuing in Inner Mongolia, which had affected private investors' confidence.

"Coal prices are falling dramatically. Private coal companies are suffering. But the State-owned ones are strong enough to cope," he said.

A coal trader, who wished to remain anonymous, from Shanxi province, which meets about 70 percent of the nation's total coal demand, said the current problem is the absence of buyers.

Coal inventories in Qinhuangdao port, the world's largest coal-trading port, hit 9.3 million tons in June and are now around 8.5 million tons.

"I stayed at Qinhuangdao port for two months, and I sold nothing," said the trader. "No one is buying."

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