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Update: China’s Shenhua becomes net exporter of coal

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World Coal,

  • Update adds comments from Matthew Boyle, CRU.

China’s largest coal miner, Shenhua, saw coal production fall 8.4% in 2015, according to its latest operational data released to the Hong Kong Stock Exchange. Coal sales fell by 17.9%, while coal imports collapsed by 97.1% to just 200 000 t – and nothing in December 2015.

As a result, with 1.2 million t of coal exports (down 25% on 2014), the company became net exporter of coal for the first time – a fact the IEEFA picked up in its analysis of Shenhua’s results.

“With Shenhua owning its own dedicated in-house rail and coal port infrastructure (in fact, the largest coal port in the world) and with the company reporting a significant net cash profit margin on its in-house coal production, there is scope now for an acceleration of coal exports from China in the face of continued declines in domestic demand,” wrote the IEEFA’s Tim Buckley.

Shenhua’s Huanghua Port handled 111.6 million t in 2015 – down 15.2% on 2014, while its coal dock at Tianjin handled 40.3 million t of coal (up 10.1%).

Its move away from coal imports also asks questions of its investment in the US$1 billion Watermark coal project in the Liverpool Plains region of New South Wales, Australia. That project includes the construction of a 10 million tpa opencast mine to be connected by rail to the coal export port at Newcastle.

“The company is still holding (for now) to its public commitment to […] the Watermark project,” said Buckley, “but it seems an empty pledge […] Shenhua is simply a company that no longer relies on imported coal. It doesn’t need a big new mine in Australia.”

Matthew Boyle of CRU, however, was more skeptical of the significance of the news. "I personally would not put too much weighting on the fact that Shenhua would appear to have become a net exporter in 2015. 1.2 million t of exports out of total coal sales of 370.5 Mt of coal sales is really insignificant in the grand scheme of things," Boyle said in a emailed statement to World Coal.

Nor does Boyle believe it will mark a shift towards China becoming a net exporter of coal: "I do not believe China, as a total whole, will become a net exporter of coal out to 2020. You might find some coal producers could seek to export coal to the seaborne market, to counter a decrease in domestic demand. However, it is unlikely to eclipse the total of imports China is expected to take in 2016 through to 2020.

And as for Watermark: "We still have it potentially starting in 2020, although there is some risk production will begin in 2020, meaning it could be delayed by a couple of years. This is mainly due to protests by local residents delaying any ground-breaking," said Boyle.

In its explanation of its falling sales, the company blamed “the adjustment of energy structure in China” – as well as the weather, noting a falling demand growth for power, faster growth in non-fossil-fuel energy sources and the fall in utilisation levels at thermal power plants due to a rapid increase in capacity.

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