Chinese Coal Titan Shenhua Cashes In on Record Price Surge

(Bloomberg) -- China’s biggest coal miner is profiting handsomely from record prices, as producers of the fuel benefit from an energy crisis that’s shuttered factories in the country and threatens global economic growth.

China Shenhua Energy Co.’s profit soared after it boosted output of the nation’s mainstay fuel. A shortage of coal has led to curtailments to industrial customers, and power plants are desperately trying to build stockpiles ahead of winter. The ensuing price rally turned so hot that the government intervened, leading to a sharp decline in coal futures this week. 

Beijing is urging miners to boost output by an extra 100 million tons in the fourth quarter to ease the energy crisis, allowing them to revive idled mines and promising easier credit. 

The government has also told them to set reasonable prices. Shenhua’s parent has vowed not to sell coal for more than 1,800 yuan ($282) a ton, well below current spot levels. About 90% of the company’s sales are on long-term contracts, which have lagged the market, Bloomberg Intelligence analyst Michelle Leung said.

Shenhua is the main listed unit of China Energy Investment Corp., which last year produced 530 million tons of coal, more than the U.S. or Australia. The state-owned giant also operates coal-fired power stations and is one of the world’s biggest investors in renewable power.

Shenhua’s net income for the nine months through September was 40.8 billion yuan, up 21% from a year earlier after revenue climbed 40%. Output rose 3.5% to 224 million tons, well placed to hit an annual production target of 284 million tons set earlier in the year. 

The country’s second- and third-largest listed miners also issued preliminary reports showing huge profit gains over the first nine months of 2021, with Yanzhou Coal Mining Co.’s rising 65% and China Coal Energy Co.’s increasing by as much as 199%.

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With assistance from Bloomberg