trending Market Intelligence /marketintelligence/en/news-insights/trending/1b5vogzxt_dqkcsealbu1q2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

China's coal majors put global expansion on hold to focus on domestic operations

COVID-19 Mining Impacts — Mining Projects With At-Risk Production

Mining Insights Newsletter June 2020

Essential Energy Insights - June 11, 2020

A Decade of Underperformance for Gold Discoveries


China's coal majors put global expansion on hold to focus on domestic operations

In mid-2017, Chinese coal major Yanzhou Coal Mining Co. Ltd. hit headlines around the world when it beat Glencore PLC to acquire Rio Tinto's Coal & Allied Industries Ltd. unit in a US$2.69 billion deal which doubled the Chinese producer's annual production capacity.

However, the deal — which marked yet another milestone in China's ambitious strategy to acquire strategic global resources — has failed to inspire other Chinese coal majors to follow suit with similar acquisitions.

This comes despite an abundance of opportunities in M&A in the coal sector. In March, Rio Tinto said it was exiting from Australian coal by selling its 80% stake in the Kestrel mine in Queensland in a US$2.25 billion deal. At the same time, Glencore said it was mulling a bid to buy back the Optimum coal operations in South Africa.

In China, however, any enthusiasm for M&A in coal assets abroad is being overshadowed by the launch in August 2017 of a government campaign to consolidate the domestic coal industry, which is targeting to create several large mining companies by the end of 2020. Yanzhou Coal has already ruled out ruled out further M&A this year, saying it would instead focus on its domestic operations.

China Shenhua Energy Co. Ltd., another major Chinese coal producer, has said it was also not considering overseas deals , according to chairman Ling Wen.

"We are interested in [acquiring] overseas projects, but right now we are not in talks for any deals," Ling told S&P Global Market Intelligence, noting that the company will focus on its own assets and on the consolidation of its operations after parent group China Energy Investment Corp. Ltd. took over China Guodian Corp. — an electricity producer — as part of the government's restructuring campaign.

Ling added that the company remains open to further mergers with other Chinese coal companies provided it was synergistic. "As a leader in the industry, we will not rule out the possibility of further restructuring," he said.

A Chinese coal analyst, who declined to be named, said in an interview that "vertical integration" — such as that which was carried out by China Shenhua's parent, in which a coal major merged with a power producer — has set an example for upcoming deals.

The analyst expected China Shenhua to remain a key player in the government campaign to consolidate the coal sector, seeking out power assets or acquiring coal-producing companies.

"We believe that future restructuring will be conducted in two directions. One is vertical integration and the other is horizontal, in which coal-producing companies can merge and integrate," the analyst said.

According to the analyst, China Coal Energy Co. Ltd. is playing a leading role in acquiring and merging coal producers, as its state-owned parent China National Coal Group Corp. was designated by the Chinese authorities to take over coal mines run by government-controlled enterprises.

China Coal previously said it was evaluating overseas opportunities, as the domestic restructuring being carried out by its parent group has progressed slowly.

A Beijing-based commodity analyst said vertical integration, such as that being spearheaded by China Shenhua, tends to move faster than the type of merger of similar coal producing companies which China Coal Energy is seeking to carry out. This was because the current high coal prices have strengthened coal producers' profitability and put the power companies in a weaker negotiating position.

"The strong domestic demand will continue to support coal prices and producers' profitability this year," the analyst said, noting that power plants have been under pressure and some smaller ones have had to suspend operations because of the price level.

Meanwhile, restructuring in China's coal sector may not be limited to state-owned companies. MK Lau, head of corporate finance and investor relations with Hong Kong-listed coal producer Kinetic Mines & Energy Ltd. said that some private companies may also take advantage of the restructuring in China's coal industry in seeking out acquisitions.