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August 3, 2016

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Coal giants profit from overcapacity reduction

CHINA’S coal giants seem to have turned their losses into profits as the industry improved helped by a reduction in overcapacity, according to the National Development and Reform Commission yesterday as well as companies’ annual earnings reports.

Shaanxi Coal Industry Co indicated a net profit of 280 million yuan (US$42.2 million) in the first half of the year in its interim earnings report while China Coal Energy Co predicted a net earnings of 520 million yuan.

The coal companies are mining profitability as overcapacity is being cut. The NDRC said that the output of coal across China has shrunk 9.6 percent over the first six months from the same period of last year.

By the end of July the Bohai-Rim Steam-Coal Price Index, a benchmark for China’s coal prices, surged 15.9 percent since the beginning of 2016, equivalent to a growth of 59 yuan per ton.

Deng Shun, an analyst at ICIS, a global consulting company in energy, forecast coal prices in China to rise in coming months as the reduction in overcapacity continues.

His view was echoed by Shenwan Hongyuan Securities which said in a recent report that efficiently-managed coal companies could expect more profits.

“The coal industry as a whole is upgrading with the closing of poorly operating companies,” the report pointed out.


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