Coal prosperity index falls to 10-yr low in Q3 (2)

The scale of net import reduced somewhat

On the basis of initial seasonal adjustment, the export of coal industry in the third quarter was $280 million, reducing by 16.4 percent year on year, 25 percentage points lower than the one in the last quarter; it reduced by 49.2 percent quarter on quarter and the one in the last quarter reduced by 22.3 percent. In spite of the high drop of coal export, there is only a small coal export proportion in China so the change of export has little effect on the production and operation of the domestic coal.

With big drop of domestic coal price since July, the coal transported through waterway in the northern ports was favored by consumers again and coal export experienced a drop month on month for 2 consecutive months. The coal export was 20.44 million tons in August, dropping by 15.8 percent month on month. However, the accumulative coal export reached 185 million tons in the first 8 months, increasing by 46.3 percent year on year. Rapid increase of coal export is due to factors like constant low international coal price, increase of supply and the Chinese policy of encouraging coal export.

Price continued dropping year on year.

The factory price of coal industrial producers in the third quarter dropped 6.7 percent year on year. It changed from the increasing year on year in the last quarter to the dropping year on year in the third quarter. There were two reasons for the coal price drop. Firstly, the weak demand and low coal price in the international coal market resulted in constant drop of the domestic coal price. Secondly, due to constant slowdown of macro economy and weak demand, the domestic coal price kept reducing.

Inventory kept at a high level.

On the basis of initial seasonal adjustment, capital occupation of finished products in the coal industry reached RMB 89.45 billion yuan at the end of third quarter with the absolute quantity hitting the new high in the history, increasing by 33.7 percent year on year, 9.3 percentage points higher than that in the last quarter, increased 13.9 percent quarter on quarter. Since this year, due to the double influence of steady increase of raw coal output in the major producing areas and constantly weak demand for coal in the downstream, the coal market was oversupplied, mainly including inventory growth of coal enterprises, ports and power plants.

It must be said that with formation and release of capacity in some large and super large mines under construction, the coal overcapacity problem in China will be more visible and there is larger pressure for the coal industry to reduce inventory and capacity.

Profitability reduced to a large extent.

On the basis of initial seasonal adjustment, the total profit of the coal industry in the third quarter was RMB 65.05 billion yuan, dropped 40 percent year on year with the drop range increasing by 33.1 percentage points compared with that in the last quarter; it reduced by 37.4 percent quarter on quarter, but in last quarter, it is 0.6 percent increase quarter on quarter.

The sales profit rate in the coal industry was 7.5 percent in the third quarter, 4 percentage points lower than that in the last quarter, but still higher than 5.3 percent, the average industrial sales profit rate.

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