Huaibei Mining Holding Co., Ltd, a listed company of state-run Huaibei Coal Mining Group, anticipated coking coal supply-demand gap could emerge by the end of the year and believed the long-term outlook for the industry remains positive.
The optimistic statement was made by Chairman Sun Fang at the company's third-quarter earnings conference on November 7.
The closures of many outdated domestic coal mines in recent years, a decline in newly-added capacity, coupled with stricter safety regulations, have impacted short-term coking coal production, Sun said.
Meanwhile, supply of imported cargoes may also be affected, with adjustments of policies in major exporting countries, including tariff increases, export bans, he said, noting Australia's possible inclusion of coking coal, bauxite, and iron ore into its "critical minerals" list.
Demand for coking coal, however, has been on the rise, particularly in the first nine months of this year, driven by increased pig iron production, according to Sun.
China's steel demand is expected to further increase, as the macroeconomic policies, including those related to the real estate, gradually show effect, and with the issuance of a 1 trillion yuan government bond to support post-disaster recovery, reconstruction, and disaster prevention and relief projects. This, in turn, will drive an increase in demand for coking coal, he pointed out.
Huaibei Mining reported a profit of 14.7 billion yuan in the third quarter, a decrease of 10.74% on the year but relatively stable compared to the second quarter. Despite the profit drop, the company improved its cost control, with coal sales cost decreasing significantly to 624 yuan/t in the first three quarters from 670.44 yuan/t in the first half of the year.
Sun attributed the cost reduction in the third quarter to several factors, including unaccrued benefit wages owing to the decline of coal prices, lower operating costs (e.g. materials), and reduced investment on relocations.
Huaibei Mining's long-term coking coal contract prices increased to about 2,000 yuan/t in the fourth quarter, up by about 175 yuan/t on average compared with the third quarter, Sun said.
(Writing by Emma Yang Editing by Harry Huo)
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