Coal firms shift in di­rec­tion to bat­tle slump in mar­ket

China Daily (Canada) - - BUSINESS - By LI XIANG and YANG ZIMAN

Loss-mak­ing coal com­pa­nies are di­ver­si­fy­ing their busi­ness port­fo­lios, some in imag­i­na­tive ways, as China pushes on to­ward struc­tural re­form aimed at re­duc­ing in­dus­trial over­ca­pac­ity.

For in­stance, some have been look­ing to tap into the beef retail mar­ket, the med­i­cal sec­tor or on­line gam­ing in­dus­try, me­dia re­ported on Wed­nes­day.

But too many firms re­main “on thin ice”, said one an­a­lyst, be­cause of the in­dus­try’s ex­cess sup­plies and in­suf­fi­cient de­mand.

At least 19 of the coun­try’s 37 listed coal min­ers are now ex­pected to fall into the red in 2015, ac­cord­ing to fi­nan­cial sta­tis­tics provider Wind In­for­ma­tion. And it pre­dicts that very few of the other 18 will turn a profit in the fore­see­able fu­ture.

So far, only Jizhong En­ergy Group, a State-owned en­ergy com­pany based in He­bei prov­ince, has re­ported growth, ac­cord­ing to its lat­est an­nual re­port.

The on­go­ing global slump in com­mod­ity and oil prices weighed heav­ily on the stock prices of listed re­source- and com­mod­i­tyre­lated com­pa­nies, in­clud­ing coal and steel pro­duc­ers.

An in­dex that tracks listed coal pro­duc­ers in Shang­hai and Shen­zhen dropped by 5.39 per­cent while the in­dex tracks steel pro­duc­ers de­clined by 5.75 per­cent.

Xin­jiang Bai­hua­cun Co, a coal min­ing and cok­ing sub­sidiary of Xin­jiang Pro­duc­tion and Con­struc­tion Corp, is now on the brink of be­ing delisted from the stock ex­change due to its heavy losses.

But the com­pany has re­vealed it has set its sites, too, on the health­care in­dus­try af­ter buy­ing Nan­jing Huawe Medicine Tech­nol­ogy De­vel­op­ment Co, a busi­ness founded in 2000 which pro­vides re­search and tech­ni­cal ser­vices.

Bai­hua­cun’s dra­matic shift in di­rec­tion is be­ing re­peated else­where in the sec­tor.

Shan­dong-based Yanzhou Coal Min­ing Co Ltd has re­leased plans to pur­chase 400 mil­lion shares from the IPO of China Zhe­shang Bank Co on the Hong Kong Stock Ex­change.

Yankuang Group Co Ltd has signed a strate­gic agree­ment with meat pro­ces­sor Delisi to build an on­line plat­form to sell high-qual­ity meat and dairy prod­ucts.

While Jin­rui Min­er­als Co, based in Qing­hai prov­ince, has bought on­line game de­vel­oper Chengdu More Fun, in an ef­fort to di­ver­sify its rev­enue re­sources.

“Ex­cess pro­duc­tion ca­pac­ity is only go­ing to dis­ap­pear through se­vere com­pe­ti­tion,” said Jiang Yaodong, vice-pres­i­dent of China Univer­sity of Min­ing and Tech­nol­ogy.

“Fur­ther con­sol­i­da­tion of re­sources and wider merger and ac­qui­si­tion will ac­cel­er­ate the process.”

His pre­dic­tion is, it will take five years for the coal sec­tor to see any sig­nif­i­cant signs of re­cov­ery.

Jing Shuiyu con­trib­uted to this story.

Con­tact the writ­ers at yangz­i­man@chi­ and lix­i­ang@chi­

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