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Although coal prices rise, the road is still long.
Release time:
2018-02-26
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Today, coal prices have bottomed out after four years of sharp decline. Some friends think that the price has risen, the industry has got out of trouble, and coal is on fire again. How to understand the current situation and how to face it is indeed a question worth thinking about. First look at the reality of the situation, coal prices rose on the industry to recover? At present, coal prices from the beginning of 2016 of 370 yuan/ton after a year of rebound to 580 yuan/ton, just a year or so up 56.8 percent, have to say that coal prices rose a bit fast. However, it must be rationally seen that the current coal price lasts less than a year compared to the industry's four-year downturn.
Today, coal prices have bottomed out after four years of sharp decline. Some friends think that the price has risen, the industry has got out of trouble, and coal is on fire again. How to understand the current situation and how to face it is indeed a question worth thinking about.
First look at the reality of the situation, coal prices rose on the industry to recover? At present, coal prices from the beginning of 2016 of 370 yuan/ton after a year of rebound to 580 yuan/ton, just a year or so up 56.8 percent, have to say that coal prices rose a bit fast.
However, it must be rationally seen that, relative to the industry's four-year downward period, the current coal price lasts less than a year, the coal industry in the long-term downward period of social security, wages, reduced development and preparation, overdue use of equipment, the accumulation of high-interest liabilities need time to slowly digest. Moreover, although the current industry profits have increased significantly, but the improvement of book profits is not equal to the improvement of cash flow, in the high debt ratio, rising financing costs, tight financial environment, the enterprise's capital turnover is still stretched, to cope with the debt service peak is still inadequate. In June this year, when we investigated some large coal enterprises, we found that their cash flow was still very tight, mainly due to high debt, rising costs, and still great pressure to repay principal and interest, which is the most real side of the coal industry.
Therefore, people from all walks of life, especially those in the coal industry, should be more rational. The era of huge profits in the coal industry has become history. If you only see the appearance of a substantial increase in book profits, and you don't know why, you will forget the pain after the scar, and it will inevitably fall again. Bottom.
Looking at the industry downturn, what lessons are worth reflecting on? I think there are four main points.
First, the period of rapid growth in coal demand has come to an end and should no longer be under any illusions. With the macro-economy entering the new normal and the adjustment of energy structure, the stage of high growth rate of coal consumption has also come to an end, and it will be a medium-and long-term trend to increase slightly and then transition to a steady decline.
Second, it is absolutely not feasible for coal enterprises to supplement prices by volume, which will only make prices fall lower and lower, and accelerate losses in the whole industry.
Three is to reduce the price of coal can not start the market. Coal consumption is a rigid demand, and its consumption is relatively small price elasticity. By fighting a price war, price cuts that lose the bottom line are meaningless to demand.
Fourth, the consequences of investment impulse are very serious. At the beginning of the "Twelfth Five-Year Plan" period, when the coal industry has shown a peak trend, some coal companies are still keen on expansionary investment, which puts a heavy burden on the company, which is also the reason for the current high debt and tight cash flow.
So how should the industry face the current situation?
It is not difficult to see that the rebound in coal prices is not long, it is too early for the industry to recover, and the healthy development will take more time. There is no reason to relax your vigilance. Therefore, we must not return to the fanatical state of the Golden Decade, invest blindly, and continue to increase production capacity. Instead, we must firm the country's goal of reducing production capacity and make fundamental adjustments in consciousness and tactics.
First, there is a real shift in consciousness from quantity and speed to quality and efficiency. Scale does not equal efficiency. In 2016, the national coal output was about 3.4 billion tons, a year-on-year decrease of 9%, but the profit growth rate of coal enterprises reached more than 200, which is a good illustration of this point. Instead of expanding the scale, it is better to tap the potential internally. Production capacity is controlled, safety is guaranteed, the environment is friendly, prices have increased, benefits have rebounded, and enterprises have become stronger. Why not?
The second is to organize production in strict accordance with the approved capacity. Although the super-capacity production that was used to in the past has guaranteed supply, it has also severely impacted the market, disrupted related planning, and put pressure on safe production and environmental carrying. In the process of building a society under the rule of law, the phenomenon of super-capacity production must not be allowed to exist. This is the principle and bottom line. Whoever breaks the bottom line will be condemned by the public and severely punished by the law.
Third, with the help of the industry's cyclical recovery period to reduce leverage. At present, the overall debt ratio of coal enterprises in China is still above 70%, and some large coal enterprises are as high as 80%. Such high debt ratios are the result of extreme expansion during the golden decade, which is also extremely unhealthy, and there is a risk of further upside along with the closure of backward production capacity and write-offs of assets. The coal industry is a typical cyclical industry. If there is a current cyclical improvement, there will be a cyclical downward trend in the future. Only by taking this opportunity to take advantage of the improvement in cash flow brought about by the rebound in coal prices and reduce the asset-liability ratio can we cope with the cyclical downturn in the future, which is the fundamental way out for sustainable development.
Fourth, adjust the industrial structure as soon as possible. On the one hand is the adjustment of coal-based industrial structure. With the current policy dividend, as soon as possible to completely exit backward production capacity, focus on priority into production capacity. On the other hand is to expand energy-related industries, based on coal, the development of wind, light and other renewable energy.
Back to the opening question, coal prices rose, the industry really out of trouble to health? The answer is no. More importantly, even if prices continue to recover and the basic outlook of enterprises is completely improved and returned to normal levels, it may not be that the industry has really improved. The coal industry must completely abandon the quantity and speed development model from the consciousness, control the output in strict accordance with the approved capacity in accordance with the law, seriously adjust its own asset-liability structure, and treat the coal market rationally. Only in this way can the healthy and sustainable development of the coal industry be realized.
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