Cost and Profit of Coal in China

In 2018, the business income of coal owners was 226.63 billion yuan, an increase of 5.5% over the same period last year. The total profit of Enterprises above the scale reached 288.82 billion yuan, an increase of 5.2% over the same period last year. The industry believes that this achievement is not easy to come by and is closely related to the deepening of structural reform on the supply side.

It is known that the problem of overcapacity in China has been effectively resolved; in the process of de-leveraging by debt-to-equity swap as the main means, the rising trend of enterprise asset-liability ratio has been curbed; cost reduction measures focused on reducing policy costs have effectively alleviated the contradiction of high enterprise costs; and many problems have been solved, such as insufficient endogenous power in industrial development, slow transformation and upgrading. The measures to compensate for shortcomings are also being promoted in an all-round way.

Based on its own powerful national coal mine cost database, combined with the latest price quotations of major ports and regions, the cost and profit and loss analysis of major representative mining areas in May shows that compared with April, the overall profitability of coal sample mining areas has been narrowed. The latest data show that in May, the profit ratio of China's power coal sample mining area was 75.0%, which was 1.7 percentage points narrower than that of last month; the profit ratio of coking coal sample mining area in May was 97.9%, which was 0.4 percentage points wider than that of last month. From the cost analysis, the average total cost of raw coal for power coal and coking coal in May was 193 CNY/ton and 366 CNY/ton respectively, and the ring ratio changed - 0.5% and 0.0% respectively. The average cost of single card arriving at Bohai Rim Port is 0.086 yuan per card, which is 1.1% lower than that in April. Among them, Shendong Mining Area (Shenfu District) has become the lowest cost mining area. The cost of single card arriving around Bohai Port is 0.071 yuan/large card, the ring ratio is flat; Wanli Mining Area and Zhungeer Mining Area have become the highest cost mining areas, and the cost of single card is 0.093 yuan/large card.

From the analysis of profit and loss, affected by coal quality, production, transportation cost, price and other factors, Wanli Mining Area has the lowest profitability in May, accounting for 30.1%, which is a small percentage point narrower than last month; Shendong Mining Area (Shenfu District) has achieved all profitability in May.

In May, the trend of the national power coal market was divided. In fact, since late April, due to the impact of falling demand, the port coal price is basically in the downward channel, the biggest resistance comes from the coal price of the origin to remain strong; in late May, the coal price of the origin loosened, becoming the last straw to "crush" the port coal price. The average cost per ton of coal arrived in Tangshan area in the selected sample mining area of coking coal is 990 yuan per ton, which is 0.4% higher than that in April. Among them, the lowest cost per ton of coal arrived in Tangshan area was 833 yuan per ton in Fenxi mining area, which increased by 0.5% annually; the highest cost per ton of coal was Wuhai mining area (Haibowan area), which was 1115 yuan per ton, with an annular increase of 0.3%.

From the analysis of profit and loss, Wuhai Mining Area (Wuda District) has the lowest profitability in May, accounting for 67.9%, with a flat ring ratio; Kailuan Mining Area, Baotou Mining Area, Fenxi Mining Area, Liliu Mining Area and Xishan Mining Area have achieved full profitability in May.

Entering May, the domestic coking coal market continues to operate strongly. Coking coal prices in Shanxi and other areas of the main production area almost go up every week. Coking enterprises have strong demand for coking coal. The coking coal market mostly indicates that sales and transportation are good. Shandong area is affected by last year's rock burst accident. This year's overall output is on the low side. In Shanxi Province, structural tension is also common, and some main coke and concentrate varieties have been relatively scarce.

Entering June, the overall coal price of the port showed a W-type fluctuation in May, then a trend of stagnation and decline, and a straight line of decline. In June, the downstream is still in a state of high inventory and low consumption of coal. Only a few terminals and traders have purchased at a low price, but the downward speed has slowed down. At present, the domestic power coal market is full of complicated news, such as freight, security inspection, import and so on, which is intertwined with good news and bad news. However, the situation of tight supply side and sluggish demand side of the market is difficult to change in the short term. We will continue to pay attention to the influence of news from all sides. In view of the trend of coal price in the later period, some insiders pointed out that there are many inquiries about low-calorie coal in the market recently. The price of low-calorie coal keeps rising to repair the price gap between 5000 and 5500 cards. In the background of the anticipation of the peak season of import events, traders are in a high tender mood, and port prices may have some upward momentum. As for coking coal, towards the end of this decade, the coke market is weak, and the coking coal stocks in coking enterprises are abundant. Recently, the purchase of coking coal has slowed down, affecting the increase of mine stocks. Some of the main producers have increased the volume and price preferential policies. The rest of the miners have also anticipated price reduction in the later market, and the short-term coking coal market is weak. As for coke, at present, the steel market is continuing to be depressed, the iron ore price is continuing to be high, and the profit of steel enterprises is shrinking. In the case of sufficient coke inventory in the plant, steel enterprises often limit the arrival of some low-quality resources to reduce the cost of raw material inventory. In the short run, the coke market may still be weak.

As of June 20, the price of CCI5500 power coal was 595 CNY/ton, which was 2 CNY/ton lower than that at the beginning of the month; the price of CCI5000 power coal was 517 CNY/ton, which was 9 CNY/ton higher than that at the beginning of the month; the price of Liulin low sulphur coal was 1620 CNY/ton, which was flat compared with that at the beginning of the month; and the price of CCI Lingshi fertilizer coal was 1170 CNY/ton, which was flat compared with that at the beginning of the month. Overall, compared with May, the overall profit ratio of coal enterprises in June was stable, moderate and weak.