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Chinese coal producers and oil refiners are struggling with weaker profits compared to other industrial earnings amid an oversupply of coal and refined products in a weak demand environment.
Demand for these commodities, as well as for steel, could be further dampened in the months ahead in the U.S.-China trade war.
Sinopec, the biggest Chinese and Asian refiner in terms of capacity, saw its 2024 earnings drop by 17% from a year earlier, attributed to lower oil prices and the penetration of electric vehicles.
“In 2024, international crude oil prices fluctuated downward, the domestic transportation industry accelerated the replacement of new energy … (and) gross profit margin was significantly narrowed,” Sinopec said in a filing with the Hong Kong Stock Exchange in March.
Sinopec is reporting earnings for the first quarter of 2025 later on Monday, and these are expected to have dropped significantly.
The biggest Chinese oil refiner and other crude processing firms have been struggling with overcapacity. China has promised to address the overproduction that is creating hardships for its oil refining and steel-making industries, but hasn’t announced any measures in this regard yet.
As a result, oil refiners and steel-makers have been the worst performers in terms of earnings among industrial companies, according to data compiled by Bloomberg.
In the coal sector, weaker demand is hitting miners. China Shenhua Energy, for example, last week reported a net income that was 18% lower for the first quarter compared to the same period of 2024.
Amid the oversupply and low domestic coal prices, China has reduced its coal imports.
Weak demand and domestic prices at four-year lows led to a 6% annual decline in Chinese coal imports in March, according to official data.
The domestic Bohai-Rim Bay thermal coal price index indicated that the domestic price for medium-grade coal slipped in early April to its lowest level since March 2021.
