1st LD Writethru-China Focus: China's major coal-production regions slash overcapacity

Guizhou, one of the country's major coal-producing provinces, shut down 183 mines in 2015 in a bid to cut obsolete capacity, according to local authorities.

Through closures, mergers and acquisitions, Guizhou has reduced its number of collieries in operation and under construction to less than 800 from about 1,700 since 2013, said a spokesman with the provincial energy administration on Monday.

It aims to close more than 80 others this year, said the spokesman.

Guizhou is the largest coal producer in southern China, with the country's fifth-largest proven reserves.

The province's move is part of a national campaign to cut overcapacity amid dwindling demand and falling prices in the coal industry.

Last year, China's coal-rich Heilongjiang Province also shut down 233 coal mines, removing 13.11 million tonnes of obsolete capacity, according to the provincial work safety authorities.

Heilongjiang has proven coal reserves of around 24 billion tonnes, accounting for more than 70 percent of the total coal reserves of the three Chinese northeastern provinces.

However, more than 95 percent of its coal mines are small with an annual production capacity of 300,000 tonnes and below. They generally feature outdated facilities, poor management and pollution.

Another coal-producing giant, north China's Shanxi Province, has decided to keep production under 1 billion tonnes per annum for the next five years. Its production in 2015 amounted to 944 million tonnes.

Shanxi has produced about a quarter of China's coal since 1949. However, In 2015, Shanxi's coal industry lost 9.4 billion yuan (1.4 billion U.S. dollars). The industry had suffered losses for 18 consecutive months by the end of 2015, beginning in July 2014.

China had about 11,000 coal mines at the end of 2015 with a total capacity of 5.7 billion tonnes.

Massive coal production powered China's economic advance in the past few decades, but shrinking domestic demand due to the economic slowdown, restructuring and environmental protection has made much of this capacity redundant.

The industry has also been hammered by falling prices. According to the China National Coal Association, between the start and end of 2015, the price at a major national coal market in the northern city of Qinhuangdao dropped about 30 percent to 370 yuan per tonne, equal to the price at the end of 2004.

Cutting overcapacity in sectors including coal and steel is part of the country's supply-side structural reform and high on the government agenda.

Earlier this month, the State Council issued a guideline saying no new coal mines will be approved before 2019 and that the country will shut down 500 million tonnes of capacity and consolidate another 500 million tonnes into the hands of fewer but more efficient mine operators in the next three to five years.

"In 2016, Shanxi will take various measures to slash overcapacity, such as shutting down some coal mines, expanding coal-electricity integration, promoting industrial reorganization and suspending new coal mine projects," said Wang Fu, director of the provincial development and reform commission.

China's coal industry employs more than 6 million people, mainly in coal-rich regions like Shanxi, Henan, Shandong and Heilongjiang.

That means the potential production cut will leave 1 million people jobless. Endi