More than 1,000 coal mines in China with a total annual capacity of 60 million metric tons are being eyed for closure this year, as the government plans to address a price-sapping oversupply in the sector, the country’s energy regulatory body announced on Monday.
China is the world's top consumer of coal but demand has been steadily decreasing as the economic growth cools and the country shifts away from fossil fuels to cleaner energy in order to curb pollution, according to Reuters.
In a notice posted on its website, the National Energy Administration (NEA) said the closures are part of a plan released earlier this month to cut down as much as 500 million metric tons of surplus production capacity within the next three to five years.
China currently has 10,760 coal mines, of which 5,600 will eventually be required to close under a policy banning mines with an annual output capacity of less than 90,000 tons, the China National Coal Association said.
The Chinese government has stopped issuing approvals for all new coal mine projects for the past three years in a bid to control capacity.
The country produced 5.7 billion tons of coal last year and has an estimated capacity surplus of 1.7 billion tons, according to Reuters.
In 2015, the supply overhang dragged down domestic coal prices by one-third, although it slightly recovered with thermal coal at the northeastern Chinese port Qinhuangdao selling up by 2.7 percent at 380 yuan ($58.29) per ton.
Aside from coal, China also seeks to curb overcapacity in the thermal power sector this year by taking over new projects and cancelling existing ones in regions with huge capacity surpluses.
Utilization rates in the power sector in 2015 dropped to their lowest since 1978, with demand failing to keep up with the rapid expansion in capacity.
China will further promote a program enabling suppliers to enter into direct power sales agreements with consumers and work to cut down on power prices this year, according to the NEA.