(Bloomberg) -- Atlas Copco AB, the Swedish maker of mining equipment and compressors, said it will close a factory in China that makes rock drills for mining, in response to Chinese cuts in coal production capacity.
The Shenyang factory in the Liaoning province that's closing mainly makes hand-held rock drills for mining and construction, Atlas Copco said in a statement. About 225 jobs will be affected, and parts of the operations will be moved to a facility in Zhangjiakou, where 45 new posts will be created.
“It's mainly the coal market that is declining,” Johan Halling, head of the company's mining equipment unit, said in a phone interview. “The Chinese government has basically decided to do away with all smaller coal mines.”
China's coal production is expected to fall by 280 million tons this year as the government has moved to decimate outdated capacity and promote a reorganization of the industry.
The efforts comes as the government tries to curb pollution that's choking the nation's cities and eliminate so-called “zombie” companies in the struggling industry. For Atlas, it adds to the woes of a slump in demand for mining equipment that started in mid-2012. In the last four years, miners including BHP Billiton Plc, Rio Tinto Plc and Glencore PLC have slashed investment budgets, cut costs and closed mines in response to a decline in commodity prices.
Last year, Atlas Copco derived 26 percent of its revenue from the mining and rock excavation business area, down from 37 percent five years ago. The unit had some 11,500 employees in 2015.
To contact the reporter on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.net. To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Andrew Noël
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