Coal miners post profit slump

Nearly 90 percent of mainland-listed coal firms posted a year-on-year profit drop in 2012, the latest data showed Monday.

Analysts expect their performance would not improve this year as sluggish coal prices and high inventory continue to weigh on the market.

Among 23 mainland-listed coal companies that have posted business performance or projections for 2012, 20 of them reported net profit drops ranging from 0.67 percent to 270.35 percent from a year earlier, according to data compiled by Zhejiang Hithink Flush Information Network Co, a domestic financial data provider.

The net profit of Taiyuan Coal Gasification Co plummeted by 270.35 percent in 2012 from 2011, a slump the firm attributed to falling coal prices in the first three quarters of 2012.

Although most companies blamed the weak macroeconomic environment for their profit decreases, some performed better than others. Shanxi-based Wintime Energy Co's net profit jumped by 206.5 percent to 988 million yuan ($159 million) in 2012, mainly due to its fast-growing coal output and investment gains.

Analysts do not expect coal companies to see better profits this year because coal demand and prices are still sluggish.

"Coking coal prices dropped recently as demand from steel plants is weak, and thermal coal inventory in major power plants is still high," Guan Dali, a researcher with commodity portal chem365.net, told the Global Times Monday.

With growing coal imports, increasing domestic coal supplies and slowing consumption growth, China will face pressure to reduce coal inventory in the near term, Pu Hongjiu, head of the China Coal Society, said at an industry forum held in Chongqing on April 1.

While Chinese policymakers hope that last month's launch of the world's first futures contract for coking coal on the Dalian Commodity Exchange will help coal producers reduce risks from price fluctuations, experts said its short-term effect is not that obvious.

Shanxi Coking Coal Group Co became the first to try the new financial vehicle. The firm said in a statement on March 22 that their intention is to hedge risks rather than to speculate.

"As far as I know, most coal producers are holding a wait-and-see attitude, as they lack understanding of the new financial product," Guan said, noting that the current market players are mainly coal traders.

"Coal producers can't rely on futures contracts to increase their profitability. Instead they should focus on strengthening management to lower operation costs amid the market downturn," Li Ting, a Shanxi-based independent coal industry analyst, told the Global Times Monday.