National Energy Report, June 28, 2019

              On June 13, the National Energy Administration organized an industry symposium on the fifth anniversary of the "four revolutions, one cooperation" new energy security strategy. In summing up the practice and effectiveness of implementing the new energy security strategy in the past five years, the meeting mentioned that China has withdrawn from the backward production capacity of 810 million tons of coal, and completed the “13th Five-Year Plan” to achieve capacity targets two years ahead of schedule.

Since the start of the coal industry's de-capacity work in 2016, with the gradual emergence of de-capacity effects, China's coal supply structure has continued to optimize, supply quality has steadily improved, and the efficiency of the coal industry has increased rapidly. At the same time, the coal production pattern, supply and demand pattern and industrial pattern have also changed, and the trend from the past to the block-based evolution has become prominent.

             Coal production in the five western provinces accounts for more than 70% of the country's total

             Recently, the National Bureau of Statistics announced the latest raw coal production data show that in May, the country's raw coal output was 312.39 million tons, an increase of 3.5%, the growth rate was 3.4 percentage points higher than the previous month; the chain increased by 18.1 million tons, an increase of 6.15%.

             From January to May, the country's raw coal output was 142.269 million tons, up 0.9% year-on-year and 3.1 percentage points lower than the same period last year. In the list of raw coal production in the provinces and provinces, there are 4 provinces and autonomous regions with cumulative raw coal output exceeding 50 million tons in January-May, namely Inner Mongolia, Shanxi, Shaanxi and Xinjiang, with a total output of 107.329 million tons, accounting for about the national total. 75.37% of the output. Among them, Inner Mongolia's cumulative raw coal output in January-May was 4,406,100 tons, accounting for 28.58% of the country's cumulative production; Shanxi's cumulative raw coal output was 3,823,600 tons, accounting for 26.87% of the country's cumulative production; Shaanxi's cumulative raw coal output was 20,262.6 million tons, accounting for the national cumulative output. 14.24%; Xinjiang's cumulative raw coal output is 80.746 million tons, accounting for 5.67% of the country's cumulative output.

             It is worth noting that coal production in Beijing, Shandong, Henan, Hebei, Anhui, Hunan, Hubei, Heilongjiang, Jilin, Chongqing, Jiangsu, Fujian, Guangxi and other provinces (autonomous regions and municipalities) has declined significantly. Among them, Shandong, Henan, Hebei, Anhui and other provinces are still traditional coal-producing areas.

            "Currently, China's coal development pattern is evolving and is transforming from the past to the block or concentration area. At present, this pattern has basically taken shape and will become more and more prominent in the future." Senior Researcher, China Energy Research Association Niu Kehong, a strategic expert of China Coal Industry Association, said in an interview with this reporter that with the continuous development of coal de-capacity work, China's coal output shows a trend of “westward and eastward retreat”, namely Shanxi, Shaanxi, Inner Mongolia and Ningxia. Coal production in five provinces and regions such as Xinjiang continued to increase; most of the traditional coal-producing areas in Shandong, Henan, Hebei, Anhui, Hubei, and Northeast faced resource depletion, and the southeastern provinces such as Sichuan, Guizhou, and Fujian were in poor coal mining conditions. The development potential is small and coal production is declining year by year.

             Not only that, from the perspective of coal production capacity distribution, the important role and strategic position of the western coal-producing area has become more and more prominent, and the production capacity has been further concentrated in the five provinces of Inner Mongolia, Shaanxi, Shanxi, Ningxia and Xinjiang. According to the national coal mine production capacity announced by the National Energy Administration on March 15, as of the end of December 2018, China has 3,373 production coal mines with complete production licenses and a total production capacity of 3.53 billion tons/year; it has been approved (approved). 1010 coal mines were started (including 64 synchronous coal mine reconstruction and renovation projects), with a production capacity of 1.03 billion tons/year, of which 203 coal mines have been built and entered into joint trial operation with a production capacity of 370 million tons/year. Among them, the production capacity and capacity under construction in the five western provinces account for about half of the national coal production capacity.

            Maintaining the basic balance of coal supply and demand conditions

            The adjustment of coal production and production capacity has prompted changes in China's coal supply and demand pattern: coal supply is increasingly concentrated in Shanxi, Shaanxi and Inner Mongolia in the west, and coal production capacity in the east is gradually weakening, but coal consumption remains online. Will this pattern of reverse supply and demand break the balance of China's coal supply and demand? Niu Kehong gave a negative answer to this.

            "If we look at the past, the reverse distribution of supply and demand patterns may bring hidden dangers to energy security. However, the current four basic conditions have made this worry no longer exist." Niu Kehong analyzed.

First, China's existing railway network construction can solve the transportation bottleneck problem well. A major problem facing the coal supply in the past was that coal could not be shipped or the transportation cost was high. At present, China has built major coal railway transportation channels such as Daqin, Yuhuang, Mengzi and Wag. In 2018, the national railway coal transportation volume has reached 2.38 billion tons. In the future, key coal transportation channels such as Menghua Railway will be completed and opened to traffic. It can be said that the layout of the railway network can basically meet the needs of coal transportation. Second, after several years of construction, China's cross-provincial trans-regional transmission capacity has been further improved, and the capacity of the West-East Power Transmission has reached approximately 230 million kilowatts, which means that electricity consumption in the eastern part of the western power generation is not a problem. Third, there is an option of “imported coal” in the southeastern coastal areas, which can make up for some of the gaps. Fourth, through the technical transformation and upgrading, the efficiency of the generator set is improved, and the coal consumption is reduced due to the reduction of coal consumption.

           "From the perspective of production, there are fewer and fewer coals in the east, but the existence of these four factors indicates that China has the conditions to maintain a basic balance between coal supply and demand. Of course, due to seasonal factors such as seasonal changes and extreme weather, Excluding the possibility of coal shortage at a certain stage in some areas, but this will not affect the overall situation. It can be said that the basic balance of China's coal supply and demand situation will not change." Niu Kehong said.

Returning to the central and eastern regions themselves, these regions may face depletion of resources, and the development is difficult and costly; or the coal mines under its jurisdiction are small in scale, poor in coal quality, low in technical level, low in safety and safety, and environmentally unsatisfactory. There is also a willingness to promote the closure of these backward production capacity. In this context, the replacement of capacity by market-based transactions between the central and eastern provinces and the western provinces was welcomed.

           Taking Chongqing as an example, it has reached an energy strategic cooperation with Shaanxi Coal Group. The former converts the capacity of shutting down coal mines into capacity replacement indicators, and is freely used for the construction of new coal mine projects of Shaanxi Coal Group. The latter provides a stable supply of high-quality coal to Chongqing, ensuring the demand for coal from major power plants and key enterprises. In 2018, the total amount of “Shaanxi coal into the sputum” reached 8.49 million tons, which has become the main force of Chongqing's coal supply. In 2019, the scale of “Shaanxi coal into the sputum” is expected to reach 10 million tons, accounting for more than 40% of the Chongqing coal market.

At present, Sichuan, Hunan, Fujian and other provinces are also actively promoting the implementation of capacity replacement projects. Through capacity replacement, not only can the coal supply be sufficient, but these provinces will have “grain in their hands and no panic in their hearts”, and they will also make room for the development of high-quality production capacity and further optimize the coal supply structure.

           Future production capacity will be more dependent on market mechanisms

          The layout of the coal industry is also resonant with the coal production capacity distribution and supply and demand pattern. Niu Kehong believes that in terms of industrial regional layout, the layout of the coal industry is consistent with the layout of coal production capacity, that is, the industrial center of gravity shifts westward, concentrated in the five western provinces; in terms of industrial structure layout, it can be summarized as Inner Mongolia, Shanxi and Shaanxi are the first lines of coal supply, while Xinjiang is more inclined to develop coal on-site conversion because of the long distance.

          In addition, after five years of de-capacity baptism, the concentration of the coal industry has further increased. On the one hand, the coal industry's de-capacity has increased the merger and reorganization of large coal enterprises, forming a competitive pattern of strong alliance and strong strength in the industry. On the other hand, with the gradual tightening of market-oriented measures such as environmental protection, safe production, and energy consumption control, the living space of small coal enterprises has been greatly squeezed and is in a disadvantageous position in the competition.

         “It can be said that in the situation of basically balanced supply and demand in the coal market, the survival of coal enterprises in the future depends mainly on market competitiveness.” Niu Kehong said that if the previous de-capacity is driven by the government and the market mechanism assists, then the future capacity will be The role of the market mechanism will be more prominent, and the government will guide and coordinate from it.

          He further explained: "The role of the market mechanism is to respect the law of the survival of the fittest in the market and let the market play a decisive role. Next, coal enterprises should pay more attention to the technical level, safe production level and environmental protection level of coal mines; The new model, taking a diversified, high-end, and efficient development path, enhances competitiveness, thereby increasing its own market-based weight."