China’s biggest coal firm set to boost exports

HONG KONG: China Shenhua Energy Co may boost coal exports as much as eight-fold as weakening domestic demand and stricter environmental rules force the company to look to overseas buyers.

The country’s biggest producer of the fuel may export 5 million to 10 million tonness of high-quality thermal coal this year to Japan and South Korea, according to vice-chairman Ling Wen. The company shipped 1.2 million tonnes last year, according to its annual report. It’s also considering entering the nuclear power business and expanding non-coal cargo over its railways as it seeks new ways to generate profit.

“Because of the saturation of the Chinese market, any coal export is good for Shenhua,” Helen Lau, an analyst at Argonaut Securities (Asia) Ltd. in Hong Kong, said by phone. “The same applies to other Chinese coal producers, as coal exports can at least generate cash flow that they may not be able to get at home.”

Shenhua Energy’s effort to boost exports echo attempts by the country’s biggest producing region, Shanxi, which wants to keep mines running and ship a surplus overseas. The government is seeking to shut roughly 9% of production capacity to shrink its industrial sector and clean polluted skies.

Shenhua Energy last week posted its third annual profit decline as the glut and shrinking demand pressured sales. Net income dropped 55% to 17.6 billion yuan (US$2.7bil) from 39 billion yuan a year ago, the Beijing-based company said. Revenues fell 30% to 177 billion yuan.

“We will consider exporting more coal as demand growth in our home market stalls,” Ling said on the sidelines of the press conference in Hong Kong yesterday. “We are trying to gradually recover our coal sales to South Korea and Japan” which have fallen over the past decade.

China’s benchmark coal prices in 2015 averaged 21% lower than the previous year. Ling estimates that prices have very little room to fall further. That contrasts with the view of Huaneng Power International Inc, the country’s biggest power generator by capacity, which sees prices falling 10 percent this year. – Bloomberg