Chinese coal giant posts third quarter drop

China Shenhua Energy Company Ltd, the country’s largest coal producer, posted a 22% drop in Q3 net profit, due to weak coal prices caused by plentiful supplies and falling demand.

The coal mining company, which also owns power plants, railways and ports, lowered its sales target for 2013 by 5.4% to 256.8 billion yuan (US$ 42 billion), reflecting lethargic markets.

Chinese coal prices fell approximately 16% in the first three quarters of 2013 due to sluggish demand, putting miners under strain by reducing costs for power producers.

Other coal producers including China Coal Energy, Yanzhou Coal Mining and Inner Mongolia Yitai Coal, also reported weak third quarter earnings. Shenhua announced its net profit for the January – September period reached 34.3 billion yuan, compared to 38.8 billion yuan in 2012. Q3 earnings fell to 9.4 billion yuan from 12.1 billion yuan a year earlier.

"The stable and promising trend of the macro-economy is expected to result in steady energy demand. With the seasonal growth in demand for coal driven by heating in winter, coal prices will stabilise gradually," Shenhua commented.

Shenhua said it expected the recent government cuts of power tariffs would reduce its pre-tax profit by about 610 million yuan in 2013.

Edited from various sources by Katie Woodward

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