Sec­tor’s prof­its set to re­main high, fol­low­ing ef­fort to cut over­ca­pac­ity

China Daily (Hong Kong) - - BUSINESS - By MENG FANBIN meng­fan­bin@ chi­

Coal in­dus­try prof­its in China are ex­pected to re­main high in the sec­ond half of the year, thanks to govern­ment ef­forts to cut ex­ces­sive ca­pac­ity and the sta­ble growth of the over­all econ­omy, said ex­perts.

“The eco­nomic re­cov­ery has led to rapid growth in the pro­duc­tion of ba­sic ma­te­ri­als like coal, steel and chem­i­cal prod­ucts,” said Zhang Likuan, an an­a­lyst at the China Coal Data Ex­change Cen­ter.

China last Mon­day re­ported a faster-than-ex­pected GDP growth of 6.9 per­cent in the first half of the year. Ther­mal coal and elec­tric­ity con­sump­tion rose by 8.2 per­cent and 6.3 per­cent re­spec­tively in the first six months year-on-year, the largest in­crease in re­cent years, data from the Na­tional Devel­op­ment and Re­form Com­mis­sion show.

The to­tal prof­its of the coun­try’s large coal com­pa­nies amounted to 123.4 bil­lion yuan ($18.13 bil­lion) in the first five months, surg­ing nearly 90 times in com­par­i­son with the same pe­riod last year, ac­cord­ing to statis­tics from the 2017 Sum­mer Na­tional Coal Fair last week.

Yangquan Coal In­dus­try is­sued its in­terim fore­cast re­port on Mon­day.

The com­pany es­ti­mated that it re­al­ized a net profit of 820 mil­lion yuan in the first half, surg­ing 865 per­cent year-on-year.

Around 111 mil­lion met­ric tons of out­dated coal ca­pac­ity were closed in the first half of the year, com­plet­ing 74 per­cent of the an­nual tar­get, NDRC spokesman Yan Pengcheng said on July 18.

There will be less pres­sure to elim­i­nate out­dated ca­pac­ity in the sec­ond half of this year, said Zhang from the China Coal Data Ex­change Cen­ter.

“As many zom­bie com­pa­nies with­draw from the mar­ket, ma­jor in­dus­try play­ers will have a big­ger role in al­lo­cat­ing re­sources and plan­ning pro­duc­tion, which fur­ther im­proves their busi­ness per­for­mance and mar­ket ex­pec­ta­tions,” said Yan.

When the coun­try’s elec­tric­ity con­sump­tion braces for its sea­sonal peak, ther­mal coal price will go up sig­nif­i­cantly and net prof­its of coal com­pa­nies will rise, said Bi Fang jing, an an­a­lyst at JLC Net­work Tech­nol­ogy Co.

Con­tin­u­ous hot weather is still rag­ing across many re­gions in China. Weather ex­perts pointed out that

The price is ex­pected to fall back in Au­gust and rise again un­til peak de­mand in the winter.” Bi Fangjing, an an­a­lyst at JLC Net­work Tech­nol­ogy Co

high tem­per­a­tures would con­tinue over the com­ing days, es­pe­cially in south­ern China.

The elec­tric­ity load of the two power grids in north­ern and north­west­ern China and 12 pro­vin­cial-level power grids has reached a record high.

In fact, coal prices have hov­ered at high lev­els since the be­gin­ning of this year due to in­creased de­mand and tight­ened sup­ply.

The Bo­hai-Rim SteamCoal Price In­dex, which tracks do­mes­tic ther­mal coal spot prices at six ma­jor ports in north­ern China, re­mained above 560 yuan per ton in Jan­uary to July, and was once as high as 606 yuan per ton.

Higher prod­uct prices have im­proved com­pa­nies’

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