China is modernizing its coal industry

China said it plans to set up several "super-heavy" coal miners by the end of 2020 as the world's largest producer of raw materials ramps up its efforts to streamline its fragmented sector and reduce obsolete capacity.

The country's National Development and Reform Commission (NDRC) has said that by the end of 2020, China plans to form a number of mega miners, each capable of producing 100 million tons of coal per year, to compete in the global market and help modernize the sector.

Last year, China had more than 4,000 coal mines with a total capacity of 3.41 billion tons per year, the National Energy Administration said in a statement. According to the China National Coal Association, only six Chinese coal companies are currently capable of producing over 100 million tons per year. These include top miner Shenhua Group, China Coal Energy Group, and Datong Coal Mine Group.

The decline in the number of companies is associated with the creation of globally competitive firms spanning many industries, including power generation, shipping and metals.

This is also due to Beijing deepening its war on smog by pursuing cleaner energy use and limiting the use of coal, which is used to generate most of China's electricity.

“In addition to eliminating excess capacity, the government is also seeking to improve the profitability of coal companies by expanding business in non-energy sectors such as power generation and transportation,” said Wu Qi, research director at the Nangang Research Institute.

In line with a five-year plan for 2020, China has pledged to eliminate about 800 million tons of obsolete capacity and add about 500 million tons of advanced products. Coal production will amount to about 3.9 billion tons per year by 2020.