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Financial Trouble Looming as Demand for Coal Continues to Decline

According to Securities Daily, as a result of China’s economic downturn and the severe drop in the demand for coal, coal prices have continued to fall. This factor, along with an increase in coal imports, has resulted in a decline in the price of domestic coal and a serious excessive capacity. In Erdos, Inner Mongolia which is highly dependent on the development of coal resources, the daily sales of coal from some coal mines is less than one-tenth of the normal amount of sales. The slump in the coal industry is seriously affecting the revenue from real estate and hotels, as well as tax revenue. The tax revenue from one coal district declined from 200 million yuan per month to 20 million per month. 

The demand for coal has fallen drastically. With a few exceptions for several major steel mills, all the steel mills in Tangshang, Hebei Province are shutting down their production. All cement plants within 100 miles of Beijing are also closing down. 

Source: Securities Daily, April 10, 2014