More M&As in coal industry suggested
Updated: 2007-11-09 11:01
More merger and acquisitions in China's coal industry are expected following recent policy guidance from the government, the Shanghai Securities News reported Thursday.
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According to the guidance, by the end of 2010, the nation should form six to eight coal groups with an annual output over 100 million tons, and eight to ten companies yielding 50 million tons. The combined output of these groups should surpass half of the nation's total. In addition, the government will promote diversified development of the coal industry based on major coal enterprises.
These coal groups also should take the lead in constructing large coal bases and may work with smaller coal mines or take them in as an affiliate company in large-scale mining projects.
The new guidance asked governments and enterprises to remove barriers on region, industry, and ownership in the integration process.
The paper quoted a coal industry analyst with the CITIC securities as saying the policy may trigger a new round of merging and integration among China's coal producers.
As early as 2005, the State Council issued the Advice on Improving the Healthy Development of China's Coal Industry, vowing to construct large coal mining bases and form large coal enterprise groups.
Since then, a series of integrations occurred in provinces like Shaanxi, Jiangxi, Ningxia, and Sichuan. And several coal groups in these provinces have taken shape.
Meanwhile, 13 large coal bases have been established to better utilize the nation's abundant coal reserves.
However, there is more yet to achieve. According to Pu Hongjiu, vice chairman of China National Coal Association, the geographical distribution of coal resources was a result of natural forces and therefore it will be more effective and efficient to perform cross-border integration, instead of moves within a single province.
According to statistics in 2005, there are 80,000 coal enterprises scattered nationwide, a large part of which are not highly yielded. The top 100 coal producers account for nearly half of the nation's annual output. The top 10, in particular, account for only 25 percent, leaving huge room for further industry integration.
According to Huang Qin, board secretary of China Shenhua Energy Co Ltd, the guidance provides large coal companies like Shenhua with more opportunities for resource integration and is definitely a boon for the company.
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