Coal news and updates

Radical reform of the coal and steel industries has cut overcapacity and reduced debt levels among State-owned enterprises.

A research report from GF Securities Co Ltd showed that repacking debt into equity and promoting policies to revamp the supply chain are helping to transform the sectors.

‘The deals will not only reduce their leverage ratio and financial pressure, but also facilitate their industrial transformation and upgrading,’ the report stated,

The reforms in the coal and steel sectors will also make these SOEs leaner and more able to adapt to a high-tech world.

This in turn will cut oversupply and stabilize prices within the industries, and make these sprawling companies more competitive.

‘Output reduction will lead to a rise in prices and company profits,’ said Yao Yang, an analyst at Shenwan Hongyuan Securities.

‘This will lay a solid foundation for the implementation of the debt-to-equity swap deals.’

Overcapacity in the coal and steel industries has been drastically reduced in the first part of this year.

Statistics from the National Development and Reform Commission showed that in the first five months of 2017, 42.39 million metric tons of steel capacity had been cut, reaching 84.8 percent of the annual target reduction. Figures also revealed that 111 million tons of coal was left in the ground during the first six months.

This was 74 percent of the annual target reduction for the fossil fuel in China.

‘But there is no need to implement large-scale coal reduction measures later in 2017,’ said an official from NDRC, implying that coal prices are now at a reasonable level.

Earlier this year, companies in the largest coal producing province of Shanxi in North China rolled out debt-to-equity swaps.

The Lu’an Mining Industry Group signed debt-to-equity swap agreements with the local State-asset regulator and China Construction Bank Corp worth 20 billion yuan ($3 billion) in March.

Source: The Central People’s Government of the People’s Republic of China

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