As a cornerstone of energy security, coal will remain the core in the energy structure in China for a long time to come. However, with increasing energy shortage and growing investment in coal in recent years, there have been issues of frequent accidents and low level of industrial concentration in the mining industry.
Take Hebei Province for example, it produces 80 million tons of coal per year but has 349 mining businesses. The top three producers are Kailuan, Jinneng and Fengfeng Mines with 30 million tons, 20 million tons and 10 million tons of annual production respectively. Because it lacks investment for deep level development and lacks large businesses to lead the industry, it fails to emerge as a key energy province even though it is rich in the coal resource. To change the current situation, Hebei has embarked on the restructuring of its mining industry. The province made a decision yesterday, that is, Fengfeng Group and Jinneng Group will be restructured to form Jinzhong Energy Group Company Ltd. The new company will be officially launched in mid July. Deputy Governor of Hebei Province Sun Ruibin said, the existing 349 mining businesses will be reduced to 60 by 2010 through acquisition, merger and restructuring, forming two large enterprise groups each with an annual production capacity of 50 million tons.
It is understood that Heilongjiang Dragon Coal Mining Group ad Anhui Huainan Mining Group are seeking acquisition targets. In addition, Shangdong State-owned Assets Supervision and Administration (SASAC) is conducting a survey of 7 relatively big mines in the province with an aim to restructure them to form a mega mining group with annual production capacity of several million tons.
Furthermore, Shanxi Province has planned a framework consisting three major mining groups: Jinbei, Jinzhong and Jinnan. At the moment Shanxi produces nearly 600 million tons of coal, in which Datong Mining and Shanxi Coking Coal account for a large percentage. There is no doubt Shanxi Province will soon form two mega mining groups each with an annual production capacity of several million tons.
Industrial insiders said, through acquiring smaller mining business and consolidate the resources; mega mining enterprises will further increase their coal reserves. Meanwhile, increasing their own scale through mergers and acquisitions helps large mining enterprises to resist market risks, and in turn helps to strengthen the cornerstone of energy safety in China.
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