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China’s pollution control yields wrong question on coal cuts

Reuters reported that just how serious is China about cutting or limiting coal consumption? That’s something that global coal miners, traders and environmentalists would love to know, but the likelihood is that it is the wrong question.

Hardly a week goes by without an announcement by one of the many central or regional authorities about plans to curb the burning of coal, the fuel that meets about two thirds of China’s electricity needs and powers the world’s biggest steel industry.

The latest was from the Beijing Municipal Environmental Protection Bureau, which was reported by state media as saying coal use will be banned in the six main districts of the capital by the end of 2020.

This is correctly viewed as the authorities’ response to what is self evident to anybody living in, or visiting, many Chinese cities: Pollution has reached intolerable levels. The problem for the global coal industry is that the country on which it is counting for much of the growth in demand is now actively looking to curb use of the fuel.

Questions are asked as to whether this time the Chinese authorities are serious about limiting coal consumption, as past efforts have stumbled on the altar of economic growth.

Given the weight of social pressure on the ruling Communist Party to do something about pollution, it seems that the answer is most likely, yes, this time they are serious. But for the international coal industry, concerned about the future of exports to China, the correct question is not by how much China will limit coal consumption but how much of the fuel it will allow to be mined domestically.

After all, even if China does limit coal use to 4.1 billion tonnes next year, what is important to the global industry is how much of that needs to be imported, at what price.

China produced about 3.7 billion tonnes of coal in 2013 and is on track to match this in 2014, given that 1.85 billion tonnes were mined in the first six months of the year.

Coal imports have also been roughly steady, rising 0.9% to 159.87 million tonnes in the H1 of 2014 from the same period a year ago. Imports were 267.1 million tonnes in 2013, up 14% from 2012.

China, similar to the rest of the world, is currently in a coal surplus, with domestic prices falling and imports only able to compete by matching lower prices and by being easier to ship to the industrial southeast of the country.

Mr Wang Xianzheng the chairman of the China Coal Industry Association said that “More than 70% of China’s coal firms are loss-making, and the situation is likely to get worse. This is leading to the closure of many smaller and less efficient mines, a process being accelerated by authorities who are closing pits for safety reasons.”

Source – Reuters

(www.nctv.net)

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