China coal producers Yankuang, Shandong Energy to merge

Major Chinese coal producers Yankuang and Shandong Energy are planning to merge, in a deal that would create one of the country's largest coal mining firms.

The announcement came after Yankuang's listed subsidiary, Yanzhou, said yesterday that Yankuang and Shandong Energy were working on a merger plan in an attempt to raise the efficiency of the coal mining industry in the eastern province of Shandong. The merger, which is subject to government approval, will not impact Yanzhou's operations, the company said.

Yankuang, which produced 166mn t of coal in 2019, has operations in Shandong and Shaanxi provinces and the Inner Mongolia region. Shandong Energy produced more than 100mn t last year, according to China's national coal association.

Joint output of more than 260mn t/yr at the newly merged company would make it one of China's largest coal producers, accounting for around 7pc of the country's total coal output. Shenhua Energy, the listed subsidiary of China's biggest state-controlled coal producer China Energy Investment (CEI), has set a production target of 268mn t for this year. China produced a total of 3.75bn t of coal in 2019.

Yankuang's Australian producing subsidiary Yancoal will also be part of the merger. Yancoal expects to produce 36mn t on an attributable basis in 2020, up from 35.6mn t last year, despite the prospect of Covid-19 suppressing demand over the rest of this year. It raised its 2020 target slightly from 2019's target of 35mn t, reflecting expected improvements to performance at its Moolarben thermal coal mine in New South Wales.

Authorities in other Chinese coal-producing provinces are pushing for similar consolidations to improve efficiency. The government of Shanxi, which is China's second biggest coal-producing province, earlier this year approved the merger of state-controlled producers Shanxi Coal Import Export and Shanxi Coking Coal.