Coal producers must face reality

Profits in China's coal industry were down by 42 percent during the first four months of this year, according to recent media reports. Despite news of supportive government policies for certain coal producers, the effects of such measures appear to have been limited.

Such lackluster financial results are hardly a surprise considering the country's weakening demand for coal. But as consumers transition toward other fuel sources, leaving prices to crumble under mounting oversupplies, something strange is happening within the industry.

Coal producers haven't cut their output.

This disregard for the law of supply and demand is only compounding the industry's woes. When demand is low, it doesn't make economic sense to create more supplies. And with central planners working vigorously to pare down the country's coal dependence in the face of a mounting public outcry over the country's deteriorating environment, a recovery in demand seems highly unlikely.

China's coal enterprises have to accept that continued market growth is not in their future. Industry executives should adjust their operations accordingly. Meanwhile, businesses in other heavily polluting industries should come to terms with their waning prospects as well.