Coal slumps after govt eases license requirements

Chinese mainland-listed coal miners suffered a slump in share prices for the three consecutive days through Wednesday after the Chinese authorities pledged over the weekend to lower the threshold for firms to enter the coal industry, a move which will likely pose a threat to the profits of existing coal miners.

The Chinese government announced Saturday on its website that it will no longer require business licenses for domestic coal firms, aiming to allow more small companies into the sector to boost coal market competition in China, the world's largest coal pr­oducer and consumer.

Prior to the country's latest move, domestic coal firms were required to secure six licenses, ranging from mining to business, before obtaining legal status.

In the past the country was less likely to distribute coal mining rights amid concerns about the limited domestic coal reserve, and the lengthy process to obtain all the licenses - especially the business license - was too difficult for many firms which wished to run coal businesses, Luo Xiangmei, a coal analyst from energy information provider C1 Energy, told the Global Times.

The latest move, designed to widen access to the coal market, may erode existing coal miners' market shares in the short term, as shown by the recent downtrend in coal sector stock prices, but it will eventually pave the way for an efficient coal industry running under market forces, Luo said.

"It is the right time for the country to launch initiatives to liberalize the coal market," Luo said, explaining that the recent gloom in the coal industry, which is unlikely to attract a huge inflow of coal firms, will ease the regulator's pressure to deal with new companies once the rule takes effect.