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China's Shanxi province touts coal export plan amid overcapacity

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China's Shanxi province touts coal export plan amid overcapacity

China'sbiggest coal region, Shanxi, touted a plan to increase coal exports to slashthe supply glut in the country, an alternative disapproved by analysts citingwoes related to global glut and weak coal prices, Bloomberg News reported March29.

"Chinaincreasing exports would come at the exact wrong time — that's the last thingthe market needs," Bloomberg quoted Andrew Cosgrove, an analyst withBloomberg Intelligence, as saying. "It would just ding whatever kind oflight there was at the end of the coal supply-demand tunnel," he added.

Thismove was proposed as an alternative for shutting roughly 9% of China'sproduction capacity which equates to a dismissal of 1.3 million workers andwould consequently risk social unrest.

Chineseshipments will impact global steel producers among others. According to thereport, exported alloy in 2015 depressed prices, hammered mill profits andtriggered trade tensions globally. The world's biggest steel producerArcelorMittalreported a full-year loss while U.S.-based U.S. Steel Corp. tagged the situation as a "majorwar."

Butaccording to Hong Kong-based Bloomberg Intelligence Analyst, Michelle Leung,the proposed shipment would only bring little impact to solve the country'sovercapacity even if exports doubled, due to lowered rebates and introducedexport taxes and licenses in 2004.

Highproduction and transportation costs also add weakness to China's coal, said thereport citing David Fang, a director with China Coal Transport and DistributionAssociation.

China'scoal imports in 2015 slipped 30% to 204 million tons, while its coal exportswere reported at 5.33 million tons, reported Bloomberg.