Coal news and updates

China's leading coal miners are expecting coal prices to be range bound at around 550 yuan ($82.8) per ton until the end of this year -- a forecast that suggests the rally since last June is likely to be ongoing.

 

"550 yuan [per ton] is the baseline forecast. We believe [coal prices] will be hovering at around this level," Wang Jinli, China Shenhua Energy's senior vice president, told reporters on Monday.

 

Wang said the price of the commodity, though down from recent highs, "will remain stable in the second half" due to "balanced" market conditions, while higher demand in certain regions during winter would only create some minor volatility.

 

Though recording a 142.9% year-on-year jump in its net profit for the six months ended in June to 26.3 billion yuan ($3.96 billion) -- a four-year high -- due to rising coal prices, the Beijing-based state-owned enterprise decided to cut production capacity in compliance with the central government's push for supply-side reform.

 

It had reduced this year's target for commercial coal production by 7% to 278 million tons and coal sales volume by 2.7% to 396 million tons, while raising the revenue target by nearly 9% to 221.5 billion yuan, of which 54.4% was achieved in the first half.

 

The cuts were in line with the merger between its parent, Shenhua Group Corporation, and electricity supplier China Guodian Corporation to form an entity known as National Energy Investment Corp. -- officially announced on Monday by the country's state-owned assets supervision and administration commission, which is overseen by the state council.

 

The new entity will have assets totaling 1.8 trillion yuan, based on data from the two companies as of March. It is also poised to become the world's largest power company by installed capacity of over 225 gigawatts, according to Edinburgh-based energy consultancy Wood Mackenzie.

 

The research firm believed the integration would allow Shenhua to diversify its fuel mix towards more clean energy, and Guodian to capitalize on Shenhua's lower-cost coal and integrated transportation infrastructure while lowering its debt levels.

 

Shenhua's management declined to comment on Monday about when the deal would be closed, but noted it would not pay a dividend for the interim period in accordance with its dividend policy, which caps the payout ratio at 40%.

 

The company surprised the market in March by announcing a special cash dividend of 2.51 yuan per share, resulting in a payout totaling 49.92 billion yuan that far exceeded the group's full-year net profit for 2016. The distribution was widely speculated to have been aimed at helping its parent, which had a 73% stake in the company and is wholly-owned by the state, to conduct the merger.

 

Source: Asia. nikkei.com