Don't think of getting coal if you don’t respond to the conditions—a report on the status quo of monopoly operation in coal transportation in Shanxi Jincheng City

Shanxi Jincheng is China's largest anthracite coal base, supplying over 70% of the coal used by domestic ammonia and urea producers. Among the five counties and cities under Jincheng's administration, Yangcheng County stands out for its high-quality anthracite, which is highly sought after. However, despite its significance, Yangcheng County lacks railway access, forcing all coal to be transported via road. Since the early 1980s, the Yangcheng Coal Transportation Company has maintained a strict control over outbound coal shipments, effectively setting up toll-like checkpoints. If companies wanted to transport coal through their routes, they had to pay a fee—otherwise, no coal would be allowed to leave. In the first half of this year, the Yangcheng Coal Transportation Company established a new subsidiary, Nengxing Economic and Trade Co., Ltd. Soon after its formation, the company began renegotiating contracts with fertilizer companies that had previously signed long-term coal supply agreements. On August 5th, Jincheng Coal Chemical Co., Ltd. signed an agreement with Nengxing, stipulating that 130,000 tons of anthracite needed for the second half of the year would be supplied by Nengxing. According to Director Han from Jincheng Coal Chemical’s Supply Department, the company was reluctant to sign the new agreement because they already had a full-year contract with Yangcheng Coal Transportation. The new agreement set a sulfur content limit of no more than 0.5%, whereas the previous Yangcheng coal had a much lower sulfur content of 0.2%. Additionally, the daily supply was only 300 tons, while the company consumed 900 tons per day. The price also increased from 550 yuan to 575 yuan per ton, adding over 3.2 million yuan in additional costs. Despite these issues, the company felt forced to comply, as without the agreement, they couldn't get any coal at all. Director Han explained, “All coal exports from Yangcheng County are controlled by Yangcheng Coal Transportation Company. They issue the invoices, and without their approval, no coal can be taken out. Re-signing the contract with another company was just an opportunity to raise prices.” Tianji Jincheng Chemical Co., Ltd., which produces 370,000 tons of synthetic ammonia and 600,000 tons of urea annually, faced a similar situation. The company was also forced to sign an agreement with Nengxing. According to one of its officials, the deadline for the old contract with Yangcheng Coal Transportation was August 25, but after that, it became impossible to obtain any coal from Yangcheng County. The official expressed confusion: “In today’s market economy, even in Yangcheng County, there should not be such a monopolistic entity exploiting the market!” According to the company, the reduction in coal supply to local firms was due to the fact that transporting coal outside the province allowed them to collect higher provincial fees. This practice stemmed from a policy introduced in 1985 by the former State Development Planning Commission, which permitted Shanxi coal companies to charge a transportation management fee of 12.5 yuan per ton during outbound shipments—known as the “coal fund.” This policy had been in place for 20 years, but it is now set to end by the end of this year under WTO regulations. Yangcheng Coal Transportation Company reportedly aimed to extend the policy for six more months before it expired. On August 22, when reporters interviewed Ma Kejin, manager of Yangcheng Coal Transportation Company, he initially denied the existence of the new agreement. After being shown the contract between Nengxing and Jincheng Coal Chemical, he admitted it existed. He also denied that the establishment of Nengxing was purely for self-interest. However, he claimed that the National Development and Reform Commission had approved an additional five years of coal fund collection in Shanxi. But on August 24, Wang Jinxiong, Deputy Director of the Industrial Policy Department at the National Development and Reform Commission, clarified that the country had not yet finalized any decision to continue the coal fund policy. Currently, two major chemical fertilizer producers in Jincheng City are experiencing severe coal shortages. As of August 22, both Jincheng Coal Chemical and Tianji Company had less than five days of coal inventory, far below the safety threshold of at least 15 days. Faced with this crisis, the companies reluctantly agreed to accept higher prices and stricter terms, as long as the coal quality met their standards. “Who allowed local coal companies to monopolize the market like this?” one executive lamented.

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