State-owned coal miner posts a large Q1 loss

Heilongjiang Longmay Mining Holding Group Co, a State-owned coal miner in Northeast China, is facing huge losses and increasing risk of capital chain rupture, China Business News reported Monday.

The company posted a loss of 1.62 billion yuan ($259.52 million) in the first quarter of 2014, after recording a loss of 2.28 billion yuan in 2013, the report said.

In addition, the State-owned "Big Four" banks have stopped granting new loans to the mining group, as China Credit Rating Co and China Chengxin International Credit Rating Co both downgraded the group's ratings in September 2013, citing its consecutive losses, rising debt burdens and high debt-to-asset ratio.

Analysts attribute the firm's large losses to falling coal prices and high production and labor costs.

The State-owned group had 248,000 employees by the end of March. It claimed that its labor cost was the highest in the domestic coal industry.

The group has already faced difficulties in paying some of its employees' salaries on time, the report quoted a worker within Longmay Mining as saying.

Longmay Mining has resorted to help from the provincial government, including postponing payment of employees' endowment insurance and seeking fiscal support, the report said.

Jilin Coal Industry Group Co, another State-owned coal miner in the region, also reported a loss of 399 million yuan in the first quarter of this year, an increase of 370 million yuan compared with the same period last year.

Coal miners in Northeast China lack competitiveness amid the weakening coal market, because of aging coal mines, inconvenient transportation and a lack of acute market sense, Dai Bin, a coal industry analyst from commodity website 315.com.cn, was quoted as saying.

China's coal market has been faced with overcapacity, high inventory and slumping coal prices since the beginning of this year, causing an increasing number of coal firms posting losses, China National Coal Association said in a report published last week.

Analysts expect that Longmay Mining is unlikely to stop its losses in the second quarter, as coal prices are still sluggish given weak electricity consumption.