Coal Stocks Limit Up on Monday As State-Owned Miner Loses Access to Bank Loans; Coal Province Capital Q1 GDP Growth 0.1%

Many coal stocks rallied 10% on Monday on the back of a market rescue plan from the Shanxi government and downsizing efforts. The rescue effort is market reforms though, which may not be good for all coal producers. On the other side is the news that banks have cut credit to a major state-owned coal miner, which is good news for private industry.

The short-term effect of market reform on the local economy is not positive for GDP growth, especially for areas that may have also built up real estate on expectations of strong natural resource sector growth.

Big Coal Is Downsizing in China, and Stock Investors Like It

Struggling coal companies in China may be preparing for large-scale layoffs and other cost-saving moves now that banks have reportedly stopped extending credit to a state-owned mining giant.

News that lenders may force major downsizing at domestic mines -- including the powerful Longmay Mining Group, which employs about 250,000 people in northeastern China -- pushed coal company stock prices higher Monday on mainland and Hong Kong stock markets.

Gaining 10% each on the Shanghai Stock Exchange were shares in affiliated but separately listed, state-owned miners Shanxi Coal International and Shanxi Coal, which respectively closed at 4.31 yuan and 4.48 yuan. Meanwhile, Yanzhou Coal (YZC) rose 10% in Shanghai to close at 7.22 yuan, while its Hong Kong-listed shares climbed 4.5% to close at HK$6.03.

State-owned coal miner posts a large Q1 loss

Heilongjiang Longmay Mining Holding Group Co, a State-owned coal miner in Northeast China, is facing huge losses and increasing risk of capital chain rupture, China Business News reported Monday.

The company posted a loss of 1.62 billion yuan ($259.52 million) in the first quarter of 2014, after recording a loss of 2.28 billion yuan in 2013, the report said.

In addition, the State-owned "Big Four" banks have stopped granting new loans to the mining group, as China Credit Rating Co and China Chengxin International Credit Rating Co both downgraded the group's ratings in September 2013, citing its consecutive losses, rising debt burdens and high debt-to-asset ratio.

Analysts attribute the firm's large losses to falling coal prices and high production and labor costs.

The State-owned group had 248,000 employees by the end of March. It claimed that its labor cost was the highest in the domestic coal industry.

内地一季度GDP倒数前三均是能源大省 救市恐难挽行业颓势

Coincidentally, Shanxi Coal Industry Bureau official said, to promote the healthy development of the economy of Shanxi Coal, Shanxi provincial government recently introduced a further 17 coal bailout policy, which has now completed the drafting of the Office of the Provincial Coal Industry, are approved by the provincial government . "Daily Economic News" reporter obtained from the Department of Shanxi Province Development and Reform Commission further confirmed that 17 major bailout content has been basically finalized.

Shanxi coal industry collective hardship, prompting the Shanxi provincial government in July last year launched a rescue plan, the "coal 20." "Measures to further promote the development of the province's coal economy to achieve sustainable growth mode" in this July 25, 2013 issued.

"Coal 20" in the number of measures designed to help reduce the burden of coal enterprises, out of trouble. To pause extract "two gold" for example, the Shanxi provincial government regulations, from last year, suspended extract coal mining enterprises and environmental restoration converting coal deposit development funds. This two total 15 yuan / ton of money, were included in the previous production costs. According to estimates of Shanxi Coal Fund Management Department of Finance, this "two gold" pause extraction, coal prices in Shanxi directly increase of about 60 billion yuan in profits.

The reality, whether it is bank loans like financial support, financial support or tax free and the like, at the time of implementation are hampered to varying degrees, policies difficult to implement. Coal prices are still faced with the burden of heavy taxes and other issues too, Shanxi province's economic structure and no abnormal situation completely changed.

Prospects of bailout policies

And "Coal 20" is different is that the forthcoming 17 coal bailout policies will be focused on the province's coal business of market-oriented reforms. Shanxi Coal Industry Department officials said last year, "Coal 20" in the first 20 made it clear that, to adhere to market-oriented reform of the province's coal operations, as to how to change, it is the focus of this year's 17 content.

"Daily Economic News" reporter found that "coal 20" mentioned in terms of market-oriented reforms, reform and improve the coal resource allocation methods, explore coal resources exploration, exploitation of price compensation mechanism, steadily coal spot, futures, insisted Shanxi the direction of market-oriented reforms in coal operations.

Some analysts believe that, despite the current downturn in the domestic coal situation, but the increase in coal production capacity reserves are still very necessary, very long time in the future, coal will continue to be China's most important energy security, and consumption will continue to increase. Therefore, the government should be supporting the policy.

Kirin risk research director, said Xu Bin, network, operating coal market reform is not an easy task, 17 coal introduction of bailout policies may not be able to play a real effect. Shanxi previous occasions to introduce policies to stimulate the development of the province's coal industry, but many times the government's commitment to compensate coal prices did not materialize, resulting trust in coal prices on the government's fall. Therefore, this 17 after bailout policies, coal prices may not be actively cooperate.

In fact, by the end of 2012, issued the "Guidelines on Deepening the electricity market reform," the State Council, clearly stated, "local people's governments of coal normal business activities do not interfere."

CEC Deputy Secretary Ouyang Changyu this view, with coal mutual administrative interference colors, artificial obstacles and provincial barriers, is not conducive to market-oriented reforms, but also contrary to the national policy and the State Council issued a document required under last year, hope National regulatory authorities to come forward on the market order.

For private coal miners, the biggest burden is too much taxes. Some media statistics, various state departments and coal taxes levied by all levels of government in Shanxi up to 25 species. Some private coal enterprises responsible person said, if you can not straighten out the living environment of coal enterprises fundamentally, the days of coal enterprises will never be better.

Taiyuan in Shanxi saw it's GDP rise only 0.1% in Q1. 山西经济断崖式下滑：煤价连跌太原GDP仅增0.1%

In the first quarter economic data showed GDP growth of only 5.5 percent, Shanxi (annual target is set for the beginning of 9%), the country ranked third from the bottom. And last year, Shanxi GDP also maintained a high growth of 9.5%. Among them, Taiyuan first quarter GDP was 52.749 billion yuan, an increase of only 0.1%, far below the level of growth over the same period this year, the country and the province's GDP.

Recently, the "Daily Economic News" reporter noted that coal prices from record high in October 2011 of 853 yuan / ton, down to the current 532 yuan / ton, a decrease of 37.6%. Shanxi coal market downturn makes a number of coal enterprises operating difficulties, it also allows "a coal-dominant" Shanxi Economic feeling the pressure.

In response, analysts said officials in Shanxi, the plight of the coal industry in Shanxi, largely due to sluggish overall economic environment, national and global economic situation has affected the development of industrial enterprises in Shanxi. A Shanxi Coal Industry Bureau officials predicted the second half of this year, Shanxi coal economy will decline slowed.

Coal prices fell the pain

Gujiao, this city because coal was born, in the coal market "golden years" end, and gradually quiet.

Public data shows, this is part of county-level city of Taiyuan, the country's largest coking coal production base, and is also connected to the provincial capital Taiyuan, Shanxi mining town northwest of modern transportation hub and distribution center for goods.

"Locals rely on friends or relatives, coal enterprises can successfully enter the work." Yang (pseudonym) is a native of ancient cross, his family five people, four people working in the coal-related. He said that before about the family's per capita wage to 3,000 yuan / month, living fairly prosperous, but from last month to 1,000 yuan per capita wages plummeted, the economy began to emerge constraints.

Yang family with similar cases, some employees because coal prices are unemployed state enterprises have ceased production. Scenery that coal prices have also been placed on production or semi-shutdown state.

In fact, the ancient cross in 2008, during the integration of coal resources in Shanxi in 2009, it has been shut down banned 23 coke, iron and other polluting enterprises. When he was party secretary Guo Gujiao hair said, shutting ban these companies directly affect GDP of nearly 20 billion yuan, "the equivalent of cross-cut of the ancient economy 'half'."

However, Yang believes that although this shutting down "movement" Let the locals income has shrunk dramatically, but not bad to the point of not sustain livelihoods. Yang was worried what really is the coal market downturn this year.

Recently, the "Daily Economic News" reporter arrived in Gujiao and found there is not much left of the private coal industry. Which Gujiao, Shanxi Coking Co., Ltd., Nanhai (hereinafter referred to as the South China Sea CHAR), has been plunged into a shutdown state. A huge enterprise deserted, stay staff told reporters late last year, there are a few single business enterprise, but since the beginning of this year, a single at all.

Unfortunately, this enterprise at the end of March this year, was included in the merger and reorganization of Shanxi Coking Industry Leading Group "in 2014 coking industry, eliminate backward production capacity of provincial objectives and tasks list." Left say employees have been evacuated, this enterprise will be sold soon after.

Not far from the first coking plant in Taiyuan, China Resources has been discontinued, the coking plant is also in the second half production status. Local taxi driver lamented, formerly earn 300 to 400 yuan a day, now only 200 yuan in revenue.

Change of industrial structure

Gujiao economy "cliff-style" decline in Shanxi is not the case. Taiyuan Bureau of Statistics chief statistician 马亚晓 this analysis, Taiyuan current economic development is entering a "climbing over the ridge, structural transformation," the new stage, which is both the national, provincial economic downturn, lack of market demand, overcapacity resolve embodied in Taiyuan, also in charge of regulation and control, optimizing the economic structure transformation must bear the pains.

Coal market remains in the doldrums, so that "a coal-dominant" Shanxi Economic feeling the pressure. Shanxi Coal Industry Bureau in the analysis of the operation of the economy in the first quarter of the province's coal mentioned in the coal market prices this year came earlier than expected, more urgent, and then drop rapidly, falling deep, coal production and operation difficulties intensified.

In fact, the price of coal from October 2011 record high of 853 yuan / ton, down to the current 532 yuan, a decrease of 37.6%. Also, the current average profit per tonne of coal enterprises in Shanxi Province is only 5.72 yuan, down 13.25 yuan, down 69.92%.

Coke say about the South China Sea, the most direct consequence of coal falling profits caused by a number of private coal prices is due to the closure of overwhelmed.

In fact, many private coal prices is in deep difficulties. According to media reports, the largest state-owned coal enterprises in Shanxi Luliang, due to the large backlog of coal, bank loans hopeless, lay mines under construction, collective crisis of private coal prices, which bring greater pressure Shanxi economy.

It is worth noting that the "economy continues to decline, the total amount of the shift gradually, gradually increasing the pressure, resources and environment." Such a predicament also appears in the "coal capital" Datong.

Back in 2009, when he was mayor of Datong, said Geng Yanbo, Datong to "coal" is famous, but digging resources to buy resources "paradox" has emerged. So, Geng Yanbo recommended rehabilitation of the ancient city , hoping to help local Yungang Grottoes, ISKCON Temple, and so many attractions, transition planning tourism industry, the first to build resource-based regional restructuring and development model city.

In fact, within the resource-based enterprises in Shanxi Province have begun inroads into tourism. Statistics show that currently there are 215 Shanxi Province resource-based enterprises turn to tourism, with a total investment of 32 billion yuan, Shanxi resource-based enterprises have become the main investment in the tourism industry. Resource-based enterprises to invest in the tourism industry, there is no lack of some major projects. In these projects, there are more than 500 million yuan of 14, more than 1 billion yuan has nine.

Shanxi Tourism Bureau Feng Jianping believes that the development of tourism resource-based business transformation proved successful, with the exploitation of underground resources accumulated funds to develop tourism resources in the ground, in line with the actual Shanxi.

A Shanxi Province Development and Reform Commission official told the "Daily Economic News" reporter, said the transformation of resource-based companies investing in tourism, the transition is a good way to get rid of the tourism industry can make long-term lack of investment in Shanxi plight. The first quarter of this year, statistics from the look, Shanxi province's tourism revenue reached 38.86 billion yuan, an increase of 21.2%, many of whom contribute to the resource-based enterprises.

Economic transformation of confusion

However, there are a lot of people expressed concern, compared to the previous energy industry, tourism revenue after less difficult to support rapid economic development in Shanxi. A Shanxi locals believe, not a lack of tourism resources in Shanxi, Shanxi, but due to the energy economy has long led the expense of investment in tourism, leading tourism resources in Shanxi did not get a good development. "That can make money out of coal mining, and tourism requires early investment in hardware and brand awareness, gain a longer period."

A financial system in Shanxi officials on the "Daily Economic News" reporter, said the industry can not simply be turned to tourism resources. In his view, Shanxi economy, the transition direction is the most viable coal-based high-tech industries, "such as, coal oil, coal gas." However, he said, after restructuring costs was not a small sum, it is a need for economic restructuring in Shanxi lasted ten years, or even 20 years of systems engineering.

Faced with these challenges, Shanxi recently started to implement the "National innovation-driven development strategies Shanxi Action Plan" and the "Action Plan for low carbon innovation in Shanxi," determined to lead the low-carbon, innovation-driven, build a national coal-based technology and industrial innovation Heights , the coal industry, science and technology innovation as a safe, efficient, clean, low-carbon development path simply realized by the "coal boss" to "Coal Branch boss" changes.

At the same time, relevant departments of Shanxi Province, and some experts suggest that the country as a low-carbon pilot provinces of Shanxi, low-carbon technology innovation Province, Taiyuan as a national low-carbon pilot cities, giving a full range of low-carbon development policy concessions; support the establishment of a number of National Engineering Laboratory, Shanxi, enterprise technical centers, and promote related technologies and achievements in Shanxi landing.

In addition, a Shanxi Coal Industry Bureau official told the "Daily Economic News" reporter, said that in addition to economic restructuring in Shanxi coal product transition, industrial restructuring, but also you can try capital operation. For example, coal "golden years" accumulated in the past a lot of money, investment banking , insurance, futures markets, seeking gains. However, there is no country in this regard related policies.

Jun-Ming Li Datong mayor said last year, hoping in Datong "organized by the International Solar Decathlon Competition" to promote the development of photovoltaic industry, which led to Datong resource conservation-friendly society.

However, analysts say, the coal industry is currently in a slump, and the photovoltaic industry is also not optimistic about the situation in such a situation, Datong throes of transition to be more intense. Because "to another bad market industry sectors from a bad market, it is certainly not easy."

Despite heavy resistance transformation, but each department is trying to change the past, Shanxi City high pollution, high energy consumption and economic development. For example in Taiyuan, Taiyuan Municipal Propaganda Department staff to the "Daily Economic News" reporter revealed that the government plans to allow municipal Taiyuan Dongshan Coal Mine slowly shrinking, and turned into a forest park on its site.

"Dongshan Coal Mine effectiveness has been bad, the output of coal quality is not good, but the Taiyuan city government to do everything possible to support it, is to ensure local employment." Taiyuan Municipal Propaganda Department officials said the government will be on the future of Taiyuan Dongshan Coal Mine Slowly let go, to be gradually retired miners, this is currently the largest municipal mine will disappear.

"Transformation is not easy." Academy of Social Sciences Institute of Urban and Real Estate Finance Strategy Research Office, told reporters Ni Pengfei, Shanxi economic transformation requires persistence, but not as usual, attend to the transformation of coal is high, the price of coal fell only think of transformation.

Expert: Shanxi's economic transformation is the biggest obstacle to technological innovation capability

One quarter of this year, Shanxi GDP a "cliff-style" decline, triggered public concern and discussion.

In this regard, the "Daily Economic News" reporter (hereinafter referred to as NBD) interview with the Economic Research Institute, Shanxi Academy of Social Sciences, deputy director Zhao Xuqiang. He said that Shanxi GDP5.5% growth in the first quarter although the level of worrying, but compared to 2009 when a negative growth of industrial restructuring, the situation is much better; current growth rate of decline and economic structure of the province have great relationship, the biggest obstacle to Shanxi's economic transformation is technological innovation.

Currently or in the energy industry as the leading type

NBD: Shanxi in the first quarter GDP growth appears what reason "cliff" type decline is?

Zhaoxu Jiang: It has a great relationship with the economic structure of Shanxi. Shanxi's economy or to the current energy-based industries as the leading, and energy industries at the forefront of the entire economic chain, when the macroeconomic situation is not good, energy-based industries have been hit bigger. For example, if the country's GDP growth fell by two percentage points, Shanxi will fall deeper and may even reach 4-5 percent. In addition, from Inner Mongolia, Australia, coal, Shanxi's coal economy also caused some impact, but this is only a secondary reason. Shanxi's economic growth, "cliff-style" main decline was due to its economic structure is not reasonable.

NBD: 5.5% growth level is not very not optimistic?

Zhao Xuqiang: 5.5% growth level is indeed worrying. However, in 2009, Shanxi industrial restructuring, reorganization, closed when a large number of coal enterprises, GDP or even negative growth. In the first quarter growth rate of 5.5% was better than the level obviously.

NBD: a quarter of the coal industry in Shanxi province's storage revenue fell by 30.3%, accounting for 36.8% of the province's income scale, the data fell 9.6 percentage points lower than the same period in 2013. Does this mean that the Shanxi coal economy is shrinking, the province's economic structure is changing?

Zhao Xuqiang: storage revenue decline in the proportion of the coal industry, Shanxi economic structure does not represent a qualitative change. Of course, do not rule out some other new industries have good signs of development, but the coal industry leading position in Shanxi's economic structure has not changed. Later, when the macroeconomic situation is slowly getting better, do not rule out the coal industry storage revenue ratio will continue to increase.

Should vigorously the introduction of high-tech and talent

NBD: What new industries at this time there will be a very good development signs do you think?

Zhao Xuqiang: for example tourism. A quarter of Shanxi province's total tourism revenue 38.86 billion yuan, an increase of 21.2%. In the case of the whole economic situation is bad, Shanxi tourism industry trend growth, showing signs of better growth of tourism.

NBD: Does this mean that the future of tourism will become a new economic growth point in Shanxi?


Zhao Xuqiang: Tourism has always been the process of economic restructuring, Shanxi want bigger and stronger focus on industry, but things did not happen overnight, Shanxi economic structure should still adhere to the coal-based, diversified development thinking, cultivate a number of pillar industries. Of course, the tourism industry should be used as one of several pillar industries. In addition, the development of manufacturing, agricultural products [ -2.33% funding research report ] [-2.33% funding research report] of the processing industry, but also a good choice Shanxi's economic transformation.

NBD: What do you think the biggest obstacle to economic restructuring in Shanxi is?

Zhao Xuqiang: technological innovation capability is the greatest obstacle to economic restructuring in Shanxi. Shanxi should vigorously the introduction of high-tech and high-tech talents, efforts to develop new products or old products in grafting new technology that allows traditional products and traditional industries to breathe new life to.

NBD: Does this mean that the Shanxi provincial government should introduce policies to attract foreign high-tech and talent?

Zhao Xuqiang: Yes. Currently the Shanxi provincial government has taken a number of short-term rescue measures for coal, which is very necessary. But to improve the technological innovation capability, it should be a long-term objectives and tasks.