China Shenhua, a leading coal company, has reported a decrease in net profit for the first half of the year. The company’s net profit is estimated to be 32.3 billion to 34.3 billion yuan, a decrease of 6.8 billion to 8.8 billion yuan compared to the same period last year. This represents a decline of 16.5% to 21.4%.
China Shenhua attributes the decrease in net profit to a decrease in the average sales price of coal and an increase in the unit production cost of self-produced coal. Additionally, there has been a year-on-year increase in income tax expenses.
The decline in domestic coal prices can be attributed to the increase in imported coal. In the first half of 2023, the country imported a total of 220 million tons of coal, a year-on-year increase of 93.0%. The cumulative import value was 27.67 billion US dollars, a year-on-year increase of 49.2%.
However, China Shenhua’s power generation business has experienced high growth, with total power generation and total electricity sales increasing by 18.2% and 18.4% year-on-year, respectively. The company attributes this growth to factors such as high temperature weather and poor hydropower output. Additionally, the increase in thermal power generation, due to newly operational facilities and the low base of the same period last year, has contributed to this growth.
In terms of the core coal business, the growth rate of commercial coal production has declined for two consecutive years. This aligns with the company’s plan to lower its 2023 coal target production as announced in its annual report last year.
The future trend of coal prices remains uncertain. According to the forecasts of Yide Futures Coal Team, July is an important period for the summer peak, with overall demand intensity expected to be maintained to some extent. Despite high inventory levels, prices are expected to receive strong support.
The decrease in China Shenhua’s net profit reflects the challenges currently faced by the coal industry. With the decline in domestic coal prices and the increase in imported coal, companies like China Shenhua will need to adapt to the changing market dynamics to ensure their long-term profitability.