Development status and Prospect Analysis of the ho

Development status and Prospect Analysis of China's coal industry

development status and Prospect Analysis of China's coal industry

China Construction machinery information

Abstract: in previous years, coal was an important energy and main industrial raw material in China, and an important force for China's rapid economic development. However, affected by environmental protection and economic downturn, the decade of China's coal gold development has passed. After 2013, the coal market began to decline, and the problem of production capacity was prominent. Until 2015, the situation of coal overcapacity has continued to deteriorate. The following is the market analysis of China's coal industry in 2016:

in previous years, coal was an important energy and major industrial raw material in China, and an important force for China's rapid economic development. However, affected by environmental protection and economic downturn, the decade of China's coal gold development has passed. After 2013, the coal market began to decline, and the problem of production capacity was prominent. Until 2015, the situation of coal overcapacity has continued to deteriorate. The following is the market analysis of China's coal industry in 2016:

the paradox of capacity reduction and "continuous one second"

coal mining enterprises have a remarkable feature in operation, that is, the initial capital investment is huge, and the subsequent production line cannot be easily shut down. Especially in mines, in order to maintain the workability of the working face, even if the output decreases, it is necessary to pump water, extract gas and carry out ventilation every day. These expenditures can basically be regarded as rigid. In operation, it is reflected in the contradiction between some rigid mining costs and sharp fluctuations in product market prices

for a typical one million ton fully mechanized coal mine, the current mining cost is yuan/ton, while the current pithead price of ordinary thermal coal in northern Shanxi is only about 200 yuan/ton, that is to say, about yuan will be lost for each ton of production. In order to reduce the mining cost per ton of coal, it is the most rational decision of coal enterprises to increase investment in technology upgrading and single well production, which is exactly in contradiction with the general direction of capacity reduction

take Tongmei as an example. During the 12th Five Year Plan, Tongmei plans to build 11 ten million ton mines, 5 five million ton mines and 12 three million ton mines: in 2015, the group successfully implemented process reengineering for four ten million ton mines, with an additional capacity of 20million tons. Majialiang, selian and Jinzhuang, three plastic machinery enterprises in China, will open up more markets, and ten million ton mines have also entered the trial production stage. Fanwang temple, beixinyao The construction of three ten million ton coal mines in Tiefeng is accelerating, and the preliminary work of two ten million ton coal mines in Baijiagou and panjiayao has begun

the natural cycle of the coal market is "ten years uphill and ten years downhill". It generally takes six to seven years for a mine to reach production capacity from the beginning of construction. The current investment cost is about 500 yuan per ton of production capacity. At the peak of the cycle in, Shanxi large coal group integrated a large number of small and medium-sized mines, superimposed the actual market financing interest rate of 13%-15% a year, and finally reached the financial cost burden of coal enterprises close to 20%

once the mine starts to produce coal, its production capacity is difficult to exit. In 2014, many expanded and newly-built capacity began to be released, leading to continuous price reduction and volume assurance of coal enterprises, which is also one of the important reasons for the sharp deterioration of cash flow of coal enterprises in recent years and forced to borrow to maintain operations

if a mine is built and not exploited, several billion yuan of investment in the early stage will be lost in a few years, and there can be a continuous flow of cash inflow to maintain production. Even if the loss is amortized, it is still cost-effective in terms of realizable cost, which is also the core reason for "continuing to produce at a loss"

"against the will" to reduce production, not necessarily to reduce production capacity

China's state-owned enterprises are generally "Pro cyclical and leveraged", which is related to the property rights system, business objectives assessment and management incentives of state-owned enterprises. In mining, a highly cyclical industry, this leverage process is reflected in: only at the peak of the cycle can we have the power and ability to raise funds significantly, while in the downward process of the cycle, the previously increased welfare, wages and salaries and other personnel costs cannot be reduced. Such problems also exist in the financing investment of state-owned banks to enterprises, that is, when enterprises need credit support most, it is the time when banking institutions have the highest risk of investing funds

around 2011, the high financing interest rate cycle, superimposed on the high coal price, and then superimposed on the capacity expansion, made the high financing demand of coal enterprises appear three-phase resonance. While the financing cycle of large enterprises is generally five years. In the secondary market, coal stocks have suffered a "Davis double kill" of declining valuations and profits. In the industrial cycle, Shanxi large coal groups generally choose the horizontal integration of "coal, electricity, chemistry and metallurgy". In the downward cycle of bulk commodities, the way of horizontal integration can not hedge the risks of the whole industry, but cause the continuous loss of funds at the group level and the loss of the whole chain. In 2016, the self generated cash flow of enterprises has been unable to cover the financial cost, resulting in frequent outbreaks of debt defaults

on the other hand, there is a "rigid demand" for output in the downstream of the coal industry: the clearing process of metallurgy, chemical industry, cement and electricity is relatively slow to be transmitted to the coal industry, while there is always cash inflow for continuous production, maintaining financial expenditure to a certain extent, and the insufficient part can only be solved by continuing to raise funds. Just as the coal group currently plans to invest 36.2 billion yuan in projects under construction, as of the end of September 2015, only 18.3 billion yuan has been completed in the electromechanical control modules with integrated hardware. It is unlikely that the rest will not be completed, so we can only continue to invest in financing

for banks, Shanxi coal enterprises can only pay interest. Compared with the previous downward cycle of coal from 1994 to 2001, the current situation is much better: from coal enterprises to employees at all levels, they have accumulated "family background" in this upward cycle, realized capitalization and capitalization at the enterprise level, and increased savings at the employee level

the "national advance and civilian retreat" of coal integration is actually a high-level takeover, which is also the root cause of the current coal dilemma in Shanxi - integration has become production expansion. If all integrated mines are put into operation, the production capacity is expected to double. In 2015, the actual output of the same coal was nearly 40% higher than the approved production capacity, of which the "infrastructure coal" and "engineering coal" integrated mines accounted for a large proportion, which was similar to the concealed production capacity of steel enterprises

mergers and acquisitions can reduce production capacity

horizontal expansion cannot reduce production capacity. What is more feasible is the technical parameters of the "Shenhua mode": install the corresponding jaw into the upper and lower jaw seats for vertical integration

simple 1+1 homogenization and combination of several coal groups, the result is that there is more water and more flour, and there is no effect of adding water. Only by combining railways, shipping, ports, coal, electricity, chemical industry, metallurgy and industry and finance can energy groups with their own hedging capabilities be generated. If Taiyuan Railway Bureau acquires downstream Tongmei, Yangmei, coking coal and Lu'an through Daqin Railway (6.18 -0.80%, buy), and then acquires power enterprises such as Qinhuangdao port and Zhangze Power (3.65 -1.88%, buy), collectively exchange shares and merge into a new large trust, this can be called merger and reorganization

the last round of coal trough cycle was the time when Shenhua was working hard and fast, and its peers were gloomy. Shenhua's coal mines, power plants and railways continued to be put into production, almost two generations ahead in technology. This round of coal downturn, Shanxi coal enterprises also want to force other competitors to withdraw from the competition in this way, such as Yanzhou, Kailuan and Hebei medium-sized enterprises that are closer to the demand market downstream. The so-called "dead friends do not die poor", go to your province first to reduce production capacity

for Shanxi, only by completely abandoning the coal industry can the coal industry have a way out. This seems to be a paradox, but in fact it is the most typical embodiment of "Dutch disease" and a living sample of "resource curse" in China