February 25, 2016 - China will aim to close more than 1,000 coal mines with a total production capacity of 60-million tons this year, as part of its plans to tackle a price-sapping supply glut, the country’s energy regulator says.

China is the world’s top coal consumer but demand has been on the wane as economic growth slows and the country shifts away from fossil fuels in order to curb industrial pollution.

In a notice posted on its website, the National Energy Administration said the closures would form part of the plan released earlier this month to shut as much as 500-million tons of surplus production capacity within the next three to five years.

China has a total of 10,760 mines, and 5,600 of them will eventually be required to close under a policy banning those with an annual output capacity of less than 90,000 tons, the China National Coal Association has estimated.

China has promised to stop approving all new coal mine projects for three years in a bid to control capacity.

The country produced 3.7-million tons of coal last year and has an estimated capacity surplus of 2-billion tons a year. Last year, the supply overhang dragged down domestic coal prices by a third, but there has been some recovery this year with thermal coal at the port of Qinhuangdao up 2.7% at 380 yuan ($58.2) per tonne.

Apart from coal, China would also aim to tackle overcapacity in the thermal power sector by controlling new builds and cancelling projects in regions with the biggest capacity surpluses, the notice said.

Utilisation rates in the power sector last year fell to their lowest since 1978, with demand failing to keep up with the rapid expansion in capacity.

As part of its power market reforms, China would further promote a scheme allowing suppliers to enter into direct power sales agreements with consumers, and also work to reduce power prices this year, it said.