China Planning 10 Mega Coal Companies

China aims to create 10 "mega" coal producers by the end of the decade as part of its drive to consolidate the industry and tackle overcapacity, the official China Daily reported on Friday, citing an energy official.

Wang Xiaolin, deputy director of the National Energy Administration, said China was preparing guidelines to create 10 new industry giants each with annual production capacity of more than 100 million tons, Reuters reported.

The report said China already has six firms with production capacity above 100 million tons. According to the China Coal Trade and Distribution Association, the new guidelines will compel coal mining regions to consolidate smaller mines over the next two years, and close those that are not restructured.

The association said large-scale state miners, including the Shenhua Group, China's biggest coal producer, are also set to undergo restructuring.

China is in the middle of a program aimed at tackling price-sapping supply gluts in the coal sector, and aims to shut at least 500 million tons of production capacity by the end of the decade, with smaller mines shut or consolidated.

It aims to shut at least 150 million tons of coal production capacity this year alone, and the campaign has helped drive up coal prices by more than a quarter since the beginning of the year.

The news comes as China has banned shipments of coal from North Korea because of Pyongyang's missile test last week. Chinese officials say they plan to make up the shortfall by importing more coal from the United States.