1. China coal firms suffer H1 profit slump on weak demand

China coal firms suffer H1 profit slump on weak demand

Profits from China's coal sector slumped in the first six months of 2015 with more than 70 percent of firms suffering losses, the country's state planning agency said, as miners grapple with persistently weak demand and chronic oversupply.

By: | Published: July 31, 2015 8:54 AM

Profits from China’s coal sector slumped in the first six months of 2015 with more than 70 percent of firms suffering losses, the country’s state planning agency said, as miners grapple with persistently weak demand and chronic oversupply.

China’s coal industry, which meets around 65 percent of the country’s primary energy demand and employs nearly 6 million people, has been hit by a slowdown in sectors like power, cement and steel, as well as a campaign to cut smog.

Large-scale coal enterprises made profits of 20 billion yuan ($3.22 billion) from January to June, just over a tenth of their profits in the first half of 2012 when the sector was performing strongly, said Lu Junling, an official with the National Development and Reform Commission (NDRC).

More than 70 percent of Chinese coal firms had suffered losses amounting to a total of 48.4 billion yuan over the period, the official Xinhua news agency reported late on Thursday.

Chinese coal production dropped 5.8 percent to 1.79 billion tonnes in the first half, but efforts to cut output have done little to support prices.

Thermal coal at Qinhuangdao port <SH-QHA-TRMCOAL> was priced at 410 yuan ($66.04) per tonne this week, down 1.2 percent from last week. It has fallen nearly 22 percent this year.

To minimise losses, firms might be forced to cut production further in the second half, and the government is also expected to take more action against illegal mining. Lu said there was still as much as 700 million tonnes of illegal annual production capacity in operation.

Earlier this week, the NDRC issued new “disciplinary measures” for illegal coal producers, saying that mines that violated regulations would be fined and denied access to credit, power and the railway network.

Though coal prices are set by the market, China’s authorities have been urging big producers to show “self-discipline” by refraining from undercutting rivals. The Xinhua-run Economic Information Daily newspaper reported this week that the biggest state-owned producers have formed a pact to keep prices steady throughout August.

The firms were said to include Shenhua Group, China Coal Energy, China Datong Coal and the Inner Mongolia Yitai Coal Group.

Spokesmen for the companies declined to comment when contacted by Reuters.

Shenhua’s listed arm, China Shenhua Energy  , said its profits for the first six months fell 45.6 percent to 11.7 billion yuan. Sales fell 24.2 percent over the same period of last year.

China Coal Energy in June warned that it expected to have suffered losses of around 1 billion yuan in the first half. ($1 = 6.2086 Chinese yuan)

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