Chinese Coal Sector Consolidates As Indian Coal Imports Surge

Chinese Coal Sector Consolidates as Indian Coal Imports Surge

The Chinese coal sector is maturing and growing sleeker through consolidation, according to a report  from Xinhua. At the end of 2012, the number of large coal-producing companies — those with revenues greater than 20 million yuan — shrank by nearly 20 percent, from 7,700 firms to 6,200.

This streamlining was reportedly driven by overcapacity. Data from the China National Coal Association shows that coal stockpiles held by producers nationwide leapt 58 percent during 2012; they now stand at 85 million metric tons (MT). China's production is up 4 percent on the year, to 3.66 billion MT, while prices at some locations in the nation have fallen as much as 27 percent, to 630 yuan ($100) per MT.

Coal companies globally are being held back by regulatory issues, according to the 2012 Mining Executive Insights survey recently released by IT-services provider Ventyx. Of the over 75 coal companies surveyed, 35 percent said that government approvals are the main constraint to the growth of their existing operations.

The second-most common response was customer demand — flagged by 21 percent of respondents — followed by available reserves at 18 percent. Only 11 percent of coal companies surveyed identified port or rail infrastructure as their main constraint.

Indian coal imports continue to surge on the back of flagging domestic production. Coal imports rose 45 percent year-on-year in December 2012, from 9.77 million MT to 14.2 million MT, according to data from Interocean Group. That includes 12.1 million MT of steam coal and 2.1 million MT of steel-making coal.

Growth efforts in India's domestic coal sector are finally starting to gain some traction, as Coal India (BSE:533278) — the world's largest coal mining company — accelerates production, according to reports from the company and the Indian government. The company is targeting an overall increase of 7 percent for this fiscal year and is aiming for further growth of 6 percent for the coming year. That will put this fiscal year's total at 492 million MT.