Overall profitability of Chinese listed coal enterprises declined in the first half of 2020, caused mainly by softening coal prices amid poor demand from end users.
According to China Coal Energy Co., Ltd, sharp slumps in coal and coal chemical products prices have greatly dampened the company's business and revenue, while China Shenhua Co., Ltd also posted yearly drops of 5.4% and 5.2% in its coal sales and average sale price during January-June because of coronavirus-induced demand destruction.
The two coal giants separately recorded yearly contractions of 39% and 14.8% in net profit to 2.31 billion yuan ($337.4 million) and 20.66 billion yuan during the half year, according to their interim reports.
Fenwei CCI 5500 index for 5,500 Kcal/kg NAR thermal coal came in at 573 yuan/t FOB with VAT at the end of June, falling 6.22% from the year prior. The average price during January-June of 2020 was calculated at 540.4 yuan/t, also down by 11.5% from 610.3 yuan/t a year ago.
China's electricity consumption weathered low ebbs of 10.1% and 4.2% declines in February and March due to COVID-19 pandemic before mildly picking up 0.7% and 4.6% in April and May.
In June, power usage growth gathered pace to 6.1% alongside gradual recovery of domestic economy and resumption of manufacturing activity.
Other major coal producers also took a hit from demand shrink. Inner Mongolia Yitai Coal Co., Ltd suffered a 61.73% plunge in net profit to 733 million yuan during the same period, while Shaanxi Coal Industry Co., Ltd and Yanzhou Coal Mining Co., Ltd logged drops of 15.08% and 14.2% to 4.99 billion and 4.6 billion yuan.
However, Jizhong Energy Resources Co., Ltd and Huolinhe Opencut Coal Industry Co., Ltd saw year-on-year increases of 34% and 2.76% in earnings to 613 million and 1.41 billion yuan.
Despite a slow recovery of economy, China's coal market is likely to remain under downward pressures given relatively loose supply and less resilient demand from end users amid high stockpiles.
Thermal coal market outlook further dimmed recently as September long-term contract prices declined from a month ago, which may drive more end users to suspend taking spot coal and pose a downward pressure for spot prices.
But in the long run, spot prices are expected to be supported by possible peak demand for winter restocking during the heating season, when imported cargoes may still face stringent restrictions by China.
(Writing by Tammy Yang Editing by Harry Huo)
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