Overcapacity government in the coal market rescues the market

The market is in the doldrums, the impact of imported coal, and the decline in prices, the coal industry is wavering farewell to the "golden profits" of the golden decade.

In 2012, China's coal social inventory exceeded 300 million tons for the first time, reaching 344 million tons. This means that the "one coal is hard to demand" event that lasted for nearly a decade has become history, and coal companies have been replaced by a crisis of oversupply.

A person in the coal industry told 21st Century Network: "In the absence of market demand, the coal industry has relatively surplus production capacity."

The situation of excess capacity in 2013 will be even more serious. According to its estimation, the social inventory of the coal industry in 2013 may be as high as 500 million tons.

In this context, local governments have successively rescued the market and tried to turn the tide and protect the local coal industry.

The “micro-profit” era was called 2012 as the most difficult year for the coal industry in the past decade.

Affected by the sluggish international economy and the slowing down of the domestic economy, the sharp decline in coal demand, coupled with the release of production capacity and the impact of low prices of imported coal, led to continuous declines in coal prices and the explosion of stocks in the ports. Coal companies are miserable.

The coal industry, which has been hot for ten years, seems to have entered the winter.

According to the annual reports disclosed by 39 listed coal companies, the profitability of these companies has declined, with nearly 80% of companies even experiencing negative growth.

Due to the sluggish demand in the downstream, coal enterprises have completely lost their bargaining power over large coal producers such as steel mills and power plants.

How to sell coal has become a major problem for the “coal bosses”. Many companies, including large state-owned coal companies, have begun to go around and look for market opportunities.

However, the purchasing enthusiasm of downstream customers is not rising. According to Li Ting, chief analyst of Chang'an Energy Consulting Co., Ltd., the main coal-fired power plants along the coast continue to approach 15 million tons, and the available days are 23.4 days, which is still at a high level.

Therefore, even if the current peak of coal consumption is “summer-summer”, the entire coal market still has no obvious signs of starting up.

In the face of the dilemma, the coal industry had to put aside its position to exchange prices for the market and played a price war.

According to the data from the China Coal Industry Association, the comprehensive average price of 5500 kcal/kg thermal coal in Bohai Rim has dropped from 797 yuan/ton in early 2012 to 638 yuan/ton at the end of the year, a decrease of nearly 20%.

Since 2013, coal prices have continued to decline. In the first quarter, the comprehensive selling price of tons of coal in Shanxi Province was 546.79 yuan, a year-on-year decrease of 43.17 yuan. In May, the regional coal-fired power plant-to-plant receiving price in Shandong Province was again reduced by RMB 20/t.

The game between coal companies and power plants is already heating up.

"The power plant is full of coal, trying to stop the coal from blocking. Only the price of coal that is out of market value is used to block coal. The more coal-suppliers see the coal-fired power plants, the more they have to sharpen their heads to lose money for coal. The power plant sees price cuts. There is still a lot of coal, and we think that the price has not yet come down, so we have to cut prices again ... and go back and forth." The industry figures said to 21st Century Network.

Affected by this, the profitability of coal enterprises has fallen sharply.

Take Shanxi, a major province of coal, as an example. In the first quarter of 2013, the province's coal industry realized a cumulative profit of only 6.522 billion yuan, a substantial decrease of 4.824 billion yuan, a decrease of 66.98%. At the same time, three of the five major state-owned coal enterprise groups suffered losses.

According to data released by the National Bureau of Statistics, in the first two months of this year, the profit of coal enterprises with a revenue of more than 5 million yuan has dropped by 34.86% year-on-year, and some large-scale enterprises have suffered losses. The proportion of loss-making enterprises has risen from 18% in the same period of last year. To 23%. Individual companies even have ** wages and delayed wages.

While domestic coal companies have been suffering from the market, imported coal has been popular in the Chinese market.

After the coal import volume reached 290 million tons in 2012, China’s coal import volume continued to increase substantially in the first quarter of this year. According to statistics from the General Administration of Customs, coal imports amounted to 120 million tons in the first four months, an increase of more than 30%.

Industry insiders predict that this year's imported coal will reach 3.6-390 million tons, an increase of 100 million tons from 2012. As the price of imported coal is lower than domestic coal prices, this will undoubtedly worsen the domestic coal companies.

The market is in a downturn, the impact of imported coal, and the price decline. Under the influence of this series of factors, the golden decade of the coal industry has gradually drifted further and further into the "beverage" era in which C & C will compete.

According to analysis of BOCI Securities, the average net profit of the coal industry in the first quarter will drop by about 50% year-on-year.

The crisis of overcapacity is behind the "micro-profits" of coal companies. The relationship between supply and demand in China's coal market has also reversed, and the problem of overcapacity has begun to appear.

It is reported that during the gold decade of the coal industry, China's coal production has also experienced a rapid growth process, from 1.16 billion tons in 2001 to 3.24 billion tons in 2010, with an average annual growth rate of 17.9%. In 2012, China produced 3.66 billion tons of coal, accounting for about 46% of the world total.

But even so, the entire industry is still in short supply.

According to Zhang Zhibin, a coal giant counseling center, under normal circumstances, 300 million tons will be used as a standard for social coal stocks. If it is less than 200 million tons or 150 million tons, it indicates that the coal market is in short supply, but if it exceeds 300 million tons, it can basically The market is defined as overproduction and oversupply.

The total social inventories in China from 2009 to 2011 were 50 million tons, 100 million tons, and 128 million tons respectively. According to this standard, China's coal industry has been in a relatively tight supply situation. However, since 2012, this relationship between supply and demand has reversed.

According to statistics from China Coal Industry Association, China's coal social inventories broke through 300 million tons for the first time in 2012, reaching 344 million tons, and the problem of overcapacity began to appear.

"It's still a relative surplus." The industry insiders said to 21st Century Network.

He believes that in the buyer's market environment where supply exceeds demand, most manufacturers should choose to limit production insured prices. "A lot of coal companies in Shaanxi, Inner Mongolia and other places have not been restricted to production or even stopped production because of the slow sales of coal."

However, the reality is not so optimistic.

Due to the importance of the coal industry to the local government, in order to increase fiscal revenue, some provinces are bucking the trend to expand the province's coal production capacity.

Shanxi Province is a representative.

In the first quarter of 2013, among the three largest coal provinces in Inner Mongolia, Shanxi, and Shaanxi, only the data from Shanxi increased. The total output of coal was 219 million tons, which exceeded Inner Mongolia and returned to the national output.

In April, this figure continued to rise to 90.62 million tons, an increase of 9.13 million tons.

According to the latest data from the Shanxi Provincial Coal Department, this year Shanxi plans to complete a 150 billion yuan investment in fixed assets for coal, build 150 mines and add 120 million tons of coal.

From a national point of view, due to the large scale of coal mines under construction in the past, combined with the release of coal mines after the merger and reorganization of coal companies and the transformation of mines, the pressure on the overcapacity of coal during the 12th Five-Year Plan period is very high.

According to statistics, as of the end of 2011, China's coal production capacity has reached about 3.9 billion tons, and the scale of construction is 1.1 billion tons.

According to estimates of the above-mentioned industry, China's coal production capacity in 2013 may reach 4.63 billion tons, which will greatly exceed the demand of 4.12 billion tons, and the production capacity will exceed 500 million tons.

"With the continuous release of these production capacities, the phenomenon of oversupply of coal will still exist for a relatively long period of time. Overcapacity may become the norm in the future."

The bleakness of the government’s rescue of the coal market has directly affected the fiscal revenue of these coal-producing provinces.

Taking Shanxi Province as an example, in the first quarter of 2013, the accumulated taxes and fees paid by the coal industry totaled 26.898 billion yuan, a year-on-year decrease of 2.03 billion yuan, a decrease of 7.02%.

In the face of such a crisis, local governments have successively rescued the market and tried to turn the tide and protect the local coal industry. Taxes and fees are reduced, coal and electricity are protected, price fluctuations in the coal market are adjusted, and even foreign coal is restricted from entry.

The municipal government of Ordos, Inner Mongolia, stated that it will continue to implement the concessional preferential tax relief policy, and according to the requirements of the company, reduce or exempt some taxes and fees.

Lanzhou, Gansu proposed that it would establish price adjustments for coal market fluctuations and subsidize policy losses to stabilize coal supply prices.

Jinan Railway Bureau of Shandong Province has restricted the shipment of coal, and has stopped coal shipments from outside the province into Shandong. It also requires provincial power companies to sign supply contracts with coal companies, and the price is 50-70 yuan/ton higher than the market coal price.

Henan has introduced the policy of “coal power and mutual protection”, and the power generation of the power plant is linked to the purchase of local coal. Super base purchase 10,000 tons of raw coal in the province to award 10 million kwh of basic electricity, less procurement of 10,000 tons of raw coal in the province to deduct 12 million kwh of electricity. To eliminate the "three West" provincial coal shocks. However, local coal prices and freight rates are 60-80 yuan/ton higher than the market price.

“As a result of this policy, the province's coal consumption in Henan province has dropped sharply.” The industry figures stated to 21st Century Network that “this has a great impact on 'Three West' and now the foreign sales have dropped substantially. In response, Shanxi Province is also facing It is planned to introduce measures to limit the coal out of the province."

In addition to local governments that have introduced policies to rescue the market, coal companies that are mired in mud are also seeking shelter from state policies and lobbying for import tariffs on imported coal.

In response, the government also responded positively.

The National Energy Administration recently issued the Interim Measures for the Administration of Commodity Coal Quality (Consultation Draft). After the industry estimates that the "Measures" will be formally introduced, the import of coal in the Mainland will be significantly reduced.

For this policy, Li Ting said that the general increase in import tariffs on imported coal is contrary to China's strategy of encouraging the import of resource products. However, different types of coal are treated differently, and tariffs on low-grade coal such as lignite and high-grade coal may be discussed.

He believes that there is almost no threshold for coal imports, which is one of the important reasons for the surge in imports in recent years. “Compared with Japan and South Korea, the proportion of low-calorie, high-*, high-ash, and other inferior coals in our total coal imports was significantly higher. After these coals came in, they not only impacted the domestic coal market, but also polluted the power plant and the environment. Protection has brought great pressure."

However, at the same time, he also stated that the restriction on the import of inferior coal is mainly based on consideration of environmental protection and is not sufficient to fundamentally ease the current plight of domestic coal companies.