China to create several mega coal firms by 2020

China will form a number of ultra-large coal mining companies by the end of 2020 as part of its efforts to streamline the bloated sector and cut outdated capacity, according to the country's top economic regulator.

The National Development and Reform Commission said that through further mergers and acquisitions (M&As), the world's largest producer of coal plans to create several coal-mining conglomerates, each with an annual production capacity of more than 100 million metric tons by the end of 2020, to compete in the global market.

The country will vigorously promote coal mining enterprises of different sizes, regions, ownership, and coal types to carry out M&As to foster a batch of modernized coal enterprises by the end of 2020, said the NDRC and 11 other ministries and organizations.

"Through these moves, the country will increase the scale of coal mining enterprises, reduce the number of small and inefficient coal mines and realize better integration of enterprises in the upper and downstream industries," said Wu Lixin, deputy director of the strategic planning research department at the China Coal Research Institute.

M&As between coal miners have been going on for some time, and this would be another step in the efforts to make the sector more efficient and profitable, Wu said.

During the first 10 months of 2017, profits of the coal mining and washing sector surged more than sixfold to 250.6 billion yuan ($38.6 billion) due to high coal prices, according to the National Bureau of Statistics.

By the end of 2017, the number of coal mines in China dropped to about 7,000 from 10,800 in 2015, said Jiang Zhimin, vice-president of the China National Coal Association.

The production capacity of large coal miners accounted for more than 70 percent of the country's total coal capacity during the first 10 months of 2017, he said, adding that around 43 percent of the country's coal was produced by its top 10 coal miners during the same period.

"However, there are still around 3,500 small coal mines with less than 300,000 tons of annual capacity," Jiang added.

The NDRC statement also said that the country would push for M&As between coal miners and electricity companies, coal-chemical enterprises as well as enterprises in the non-coal sectors, including iron and steel mills and transportation companies.

This follows the merger last year of State-owned power generator China Guodian Corp and coal miner Shenhua Group Corp Ltd to create the world's largest energy conglomerate.

With total assets of 1.8 trillion yuan, the new company, China Energy Investment Corp, has become the world's largest producer of coal, thermal power, renewable energy and coal chemicals.