Coal news and updates

Debt of mining companies in China’s leading coal province has ballooned to about the same level as its annual economic output, casting doubt over the ability of the regional authority to backstop their new bonds.

The Shanxi government plans to guarantee note sales from seven coal producers owned by the northern province, people familiar with the matter said earlier this month. Total debt of those firms climbed to 1.2 trillion yuan ($184 billion) at the end of 2015, just 100 billion yuan less than the province’s gross domestic product that year, according to a May 5 report from Citic Securities Co. Shanxi Jincheng Anthracite Mining Group Co., one of the seven firms, had to offer investors nearly double the yield of similarly-rated notes when it sold AAA rated five-year bonds at the end of last month.

“Investors are avoiding coal companies right now so it will get harder for them to issue new debt,” said Li Ning, the general manager of the fixed-income department at Western Securities Co. in Beijing. “Plus the Shanxi government supporting the region’s coal companies is financially weak.”

Coal miners in Shanxi, part of what’s known as China’s rust belt, have struggled as the nation’s worst economic slowdown in a quarter century batters demand and Premier Li Keqiang vows to cut excess capacity in industries including coal. Output of the mineral in Shanxi tumbled 10 percent last year from its peak of 976.7 million tons in 2014, according to Bloomberg Intelligence data. Chinese coal companies need to repay 268 billion yuan of bonds coming due by the end of this year, Bloomberg-compiled data show.

Source: Bloomberg