• 4 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 6 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 13 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 7 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 4 hours Why is Strait of Hormuz the World's Most Important Oil Artery
  • 2 hours Trump bogged down in Mideast quagmire. US spent $Trillions, lost Thousands of lives, and lost goodwill. FOR WHAT? US interests ? WHAT INTEREST ? . . . . China greatest threat next 50 years.
  • 3 hours California's Oil Industry Collapses Despite Shale Boom
  • 38 mins North Dakota oil output totals 1.39 million b/d in March, up 4% on month: state
  • 6 hours IMO2020 To scrub or not to scrub
  • 7 hours Knock-Knock: Aircraft Carrier Seen As Barometer Of Tensions With Iran
  • 4 hours Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 3 hours Global Warming Making The Rich Richer
  • 5 hours Rural and Conservative: Polish Towns Go 'LGBT free' Ahead Of Bitter European Election Campaign
  • 12 hours Shale to be profitable in 2019!!!
  • 11 hours Crude oil?
  • 4 hours Iceland Reducing Gas Stations By Half By 2025
  • 7 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
The Fear Driven Oil Price Rally Won’t Last

The Fear Driven Oil Price Rally Won’t Last

Oil prices have risen on…

The Single Most Bullish Indicator For Oil

The Single Most Bullish Indicator For Oil

Crude futures saw some headwinds…

This $4.3 Billion Warning Sign Is Flashing In China’s Coal Business

Peabody coal

Coal has been one of the big stories of 2016. With this beat-down market taking flight during the last half of the year — lifting stocks of major producers like Peabody Energy to over 700% gains in a matter of weeks. Check out the chart below.

(Click to enlarge)

A late rebound in the coal market this year lifted Peabody Energy from below $2 per share to over $16 very quickly

And news this week suggests things could be looking up further for international producers in this market. With problems apparently mounting in the world’s largest producing nation: China.

Chinese coal miners are still struggling under the burden of lower global prices. Which this week forced major lender Industrial and Commercial Bank of China (ICBC) to step in and bail out two big producers.

That was Datong Coal Mine Group and Yangquan Coal Industry. Which ICBC said Monday will receive debt-for-equity swaps from the bank — allowing the coal miners to take loans off their books in exchange for issuing shares to ICBC.

This basically amounts to a government handout designed to keep these coal players going. And the amounts involved are reportedly very significant — with sources telling Reuters that the two bailouts, plus an additional debt-for-equity swap with steelmaker Taiyuan Iron & Steel, total $4.3 billion.

That suggests China’s coal firms are laboring under very intense financial burdens. And not all companies are getting bailouts — with another big Chinese coal player this week defaulting on bond payments due to balance-sheet stress.

That’s state-owned Sichuan Coal Industry Group — the largest coal producer in Sichuan province. Which failed to repay principal and interest on bonds due December 25, according to reports emerging yesterday.

Related: Has The OPEC Rally Gone Too Far?

The missed payment marks the second time Sichuan Coal has defaulted this year — after the company also missed bond payments due in June. On that occasion local government banks eventually stepped in and paid bondholders. But so far, no such intervention has emerged for this latest default.

All of which suggests that China’s coal miners could see production plateau or even fall as they struggle with limited funds to cover capital and operating costs this coming year — even with financial help from the government. Watch for more defaults in 2017 (with a total $770 billion in corporate bonds estimated to be maturing this year across China), and for ensuing effects on coal production.

Here’s to a lump of coal,

By Dave Forest

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News