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World’s Largest Miner Is Leaving the World Coal Association
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From The Wall Street Journal: World’s Largest Miner Is Leaving the World Coal Association


Citing disagreements over climate change policy, the world’s largest miner departed the World Coal Association, the coal industry lobbying group. According to the article in the WSJ, another worrisome turn of events in China is the troubled financial situation of its power plants, the world’s largest buyers of thermal coal.


The article goes on to note that the trouble is the result of previous state interventions to help coal miners. In 2015, rolling coal bond defaults threatened China’s financial sector. Beijing’s response? Massive intervention to curb coal production, which pushed prices and margins higher.


Huaneng Power International, the listed arm of China’s largest power producer, posted its worst quarterly net loss since the 2009 financial crisis in December. Operating earnings in China’s power sector as a whole were barely two times interest payments in 2017—down from nearly three and a half times in early 2016.


Coal margins, meanwhile, have recovered sharply, with operating earnings now a healthy five times interest payments—up from barely one time two years ago. But since China’s power producers are even more indebted than its coal miners—their total liabilities were $1.3 trillion last year, more than twice that of coal firms—it’s hard to call this an improvement.


State media in January reported that China’s four biggest power producers had sent an urgent letter to the country’s main economic planning agency, warning that many plants nationwide were running out of cash to buy coal and that banks were curbing lending.


View The Wall Street Journal article here.

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