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Chinese coal industry freezes over - CNCA

Coal News - Published on Tue, 27 Jan 2015

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It is reported that coal provides nearly two thirds of China's energy, but for mining companies, this winter could not be more chilly.

The government has done its best to save the day, but it is not enough to force up the price of coal, even in the short term and the outlook for the coming year is no better.

According to Mr Jiang Zhimin, vice president of the National Coal Association (CNCA), an already grim situation is made worse by weak demand, overcapacity and a large amount of imports.

Rating agency Fitch called 2014 a difficult year for coal miners in China, with prices sliding by about 20%. There is a lower demand for thermal coal stemming from an array of one-off factors like the higher than average rainfall that helped hydropower generation.

The government imposed import duties ranging from 3% to 6% in October and banned domestic production and imports of low quality coal.

Mr Jiang expects oversupply and pressure on miners to remain in 2015, as China seeks environmental protection and quality growth with clean energy, but coal production actually dropped last year for the first time since 2000, and Mr Jiang predicts another 2.5% drop this year.

Coal stockpiles with miners stand at around 87 million tonnes, up 2.6% from this time last year. Worse yet, power plants have 95 million tonnes piled up, waiting to be burned; 17% more than a year ago. Major coal companies recorded profits of CNY 110 billion in the first 11 months of 2014, down 44.4%.

CNCA analyst Mr Zhang Hong believes the oversupply headache won't go away any time soon and the entire sector will come under huge pressure this year.

Mr Zhang said that "Demand is slowing. Overcapacity is yet to be digested and environmental constraints are constantly in the headlines as we transform the growth mode."

Fitch holds no hope for a meaningful upswing in coal prices in 2015. Substantial capacity investments from previous boom years are still being digested, while demand has weakened.

As the government strives for more renewable energy at the expense of coal in the longer term, thermal coal consumption is set to decline. As the world's largest consumer of coal, China burns as much as the whole of the rest of the world combined. Nearly 70% of its energy comes from coal, a proportion much higher than in developed countries, which use cleaner resources like oil and gas. China has the world's third-largest coal reserves but lacks gas and oil.

Source – Xinhua

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Posted By : admin on Tue, 27 Jan 2015
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