In the dusty grey hills of Shanxi province, China’s coal heartland, a valley of coal mines is silent. Driving towards a coking coal mine that has been idle since 2009, Laby Wu, chief financial officer of Puda Coal, observes: “A year ago this road would have been full of coal trucks.”
The mine shafts have been closed because of the giant coal consolidation project that has swept through Shanxi during the past two years. It is starting to spread to neighbouring coal-producing regions as well, part of a government reorganisation that has had far-reaching implications not just for China, but for global coal markets.
When China, the world’s largest coal producer and consumer, suddenly became a net importer of thermal coal in 2009 on the back of Beijing’s clampdown on illegal and unsafe mining in Shanxi, the shift helped propel global thermal coal prices. Today, China’s own production of coal – and the challenges in getting it to where it is needed – is increasingly pivotal for global coal markets. Earlier this year, miners and Asia-based utilities settled the annual contracts for 2011-12 at a record high of $130 a tonne, up 32.6 per cent from $98 a tonne of 2010-11.