Coal industry hit by global competition, price slumps

TAIYUAN - Chinese coal companies have seen their profit margins shrink amid sluggish demand and an influx of cheaper coal imports.

The price of coal shipped to East China's Qinhuangdao Port was at 618 yuan ($98.58) per ton by the end of the first quarter, down from the previous quarter's 633 yuan per ton.

The price of metallurgical coal has tumbled to 1,025 yuan per ton from its peak of 2,000 yuan per ton in the last quarter of 2012.

Demand for coal has also slumped due to slower economic growth. China's economic growth slowed to 7.7 percent in the first quarter of the year, below the double-digit expansion seen before the 2008 global financial crisis.

Industrial output growth ticked down to 9.5 percent in the same period, underscoring coal companies' struggles to cut inventories amid weak demand.

Moderate growth rates have weighed on industry performance, with 32 of the 43 coal companies listed on China's stock markets seeing their earnings decline from a year earlier. Revenues and profits have gone down 0.8 percent and 51.4 percent on average, respectively.

In addition, more coal is being exported to China at cheaper prices. Coal imports surged 30.1 percent in the first quarter to reach 80 million tons, statistics from the General Administration of Customs showed.

Industry experts have called for significant reforms to shake up the sector, which has been plagued by excessive stockpiling and dwindling sales.

The industry should improve its management and encourage innovation in order to boost efficiency, said Bu Changsen, chairman of the Shandong Energy Group.