Coal firms in the red as prices fall

Workers unload coal for power generation at a railway station in Nanchang, Jiangxi province. Among all the listed coal firms, Shaanxi Coal Industry Co Ltd was the worst-hit in the sector after it posted losses of 1.8 billion yuan ($284 million) in the first nine months. [Photo/China Daily]

Growth slowdown, poor power consumption and lower increase in profits seen as key reasons

More than half of the listed coal companies that have released earnings reports for the first three quarters of the year have reported losses amid a sharp fall in coal prices.

Among the 27 coal companies that have released their profit statements, 14 reported losses.

Shaanxi Coal Industry Co Ltd was the worst hit in the sector after it posted losses of 1.8 billion yuan ($284 million) in the first nine months, followed by China National Coal Group Corp with 1.7 billion yuan. Besides, many companies, including China Pingmei Shenma Group, SDIC Xinji Energy Co Ltd and Datong Coal Mine, had reported losses of more than 1 billion yuan by the end of September.

Many companies attributed the losses to the domestic economic slowdown, overcapacity in the coal industry and sluggish power consumption that have pushed down coal prices.

Even among those companies that have managed to stay profitable, the growth has eased considerably. China Shenhua Energy Company Ltd posted 16.6 billion yuan in profits during the first three quarters, down 44 percent from the same period of last year.

The Bohai-Rim Steam-Coal Price Index, an index that reflects the level and fluctuations of the steam-coal price from Bohai-rim ports, stood at 380 yuan per metric ton in late October, down 24 percent from the same period last year, decreasing seven weeks consecutively.

"After the National Day Holiday (from October 1 to 7), large coal companies lowered their prices in order to push up the sales volume for the year," said Liu Jie, a coal analyst with SCI International, a commodity information provider.

"Small and medium-sized coal enterprises will follow suit by lowering prices so as to maintain their market share. The pessimistic expectation is the main reason for the drop in indexes at the moment," Liu said.

According to the China National Coal Association, domestic coal consumption has dropped 4.6 percent year-on-year in the first three quarters, while output fell by 4.3 percent. Coal inventories crossed the 300-million-ton mark for 45 months consecutively.

"Normally the fourth quarter is the peak season for coal consumption. However, the downward pressure in the fourth quarter is still evident," said Liu.