Update: Shandong Coking Enterprises Group

In an update to reports from earlier this week about the formation of a new coal grouping in China's Shandong province, this newly-formed
Shandong Coking Enterprises Group is the world's biggest coking enterprise with annual capacity of 30 million tonnes and sales revenue of CNY 60 billion.

Mr Wang Qingtao, chairman of the Shandong Coking Industry Association and president of the group, said the group has been established to integrate resources and urge enterprises to jointly deal with fierce competition and the global financial crisis.

Shandong Coking Enterprises Group is a loose organization based on the Shandong Coking Group. It includes 45 coking enterprises as well as enterprises in railway transportation, finance and ports. Wang revealed these enterprises combined on the basis of consensus.

Shandong's coke capacity reached 45 million tons in 2008, taking third place in the country. Capacity of the 22 enterprises recognized by central government amounted to 30 million tons. But impacted by financial crisis, domestic steel and coke markets remain sluggish, leading to weak demand for coke and falling prices.

According to a report compiled by the Shandong provincial government, the province yielded 38 million tons of coke last year, far exceeding demand from the steel sector in the region. Approximately 10 million tons of coke flowed to the Yangtze River Delta Area. Primary coking coal was in severe undersupply, with more than 90% bought from other provinces.

Local government thus planned to facilitate M&As and founded the Shandong Coking Enterprises Group based on major enterprises. It aims to integrate existing capacity, realise a rational distribution of production factors and resources, insist on group development and gradually fashion the group into a large-scale diversified industry group covering coke production, coal chemistry, steel production and international trade.

Mr Wang said that an important task after the foundation is to set up Shandong Coking Enterprises Group supply and distribution company. He said that the group would coordinate market supply, provide high quality products to Shandong's steelmakers, enhance bargaining power with steelmakers in the Yangtze River Delta Area, raise added value of the products, set up long-term stable cooperation relationship with Shanxi Coking Coal Group and international coal groups.

The group will next form the Shandong Coking Group Co., Ltd via a share offering and M&As, especially mutual share holding with steelmakers and coal enterprises, and then seek financing after listing as well as co-operation with relevant enterprises.

Mr Wang also disclosed that the group would speed up international development and would set up coking bases or set up long-term cooperation relationship in overseas countries jointly with coal enterprises.

Source: Steel Guru