China's leading coal producer China Shenhua Energy Co., Ltd. reported steady results for the first quarter, though profits slipped slightly amid turbulent markets.
Shenhua said net profit attributable to shareholders fell 1.95% to 18.6 billion yuan in Q1, as cost increases ate into margins in its core coal business. However, wider factors should support Shenhua's outlook over the rest of 2023.
Coal production fell by a modest 0.9% year on year in January-March, but rose 2.7% from Q4 2022. Over the same period, sales rose 1.8% on the year but fell 0.9% from the previous quarter.
Average selling prices remained largely flat at 621 yuan/t from Q1 2022 but fell 66 yuan/t from the quarter prior. Costs for coal production jumped 12.9% on the year to 169.4 yuan/t but down 12.3% from Q4 2022.
Shenhua's power generation business proved more resilient, posting a 12% profit increase thanks to a 10.6% jump in electricity output and lower coal costs. Meanwhile, benchmarks prices for electricity climbed.
The results highlight the dual forces impacting Shenhua and China's coal sector more broadly. On the one hand, short-term costs and price shocks introduce volatility. But longer-term trends around electrification, infrastructure growth and post-pandemic demand shifts continue to support coal's outsized role in China's economy.
Shenhua expects that dynamic to persist this year. While China's economic growth will drive coal consumption and government policies will encourage domestic coal production increases, supply growth may start to moderate. Coal imports are also likely to climb.
Overall, China's coal market should remain balanced, according to Shenhua, though some areas could see tight supply at times due to seasonal changes or supply chain disruptions.
(Writing by Alex Guo Editing by Harry Huo)
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