Hong Kong-listed Chinese commodity trader Qinfa Group has announced that it has reached an agreement with Bo Hai Investment, under which it will sell the entire equity interest in Hong Kong Qinfa International Trading to the latter for RMB176.7m ($26.4m), as part of its restructuring plan.
The principal activities of Hong Kong Qinfa International Trading was coal mining, trade, storage and shipping in China, all sectors that have peaked and are now in recession as coal use in the world’s most populous nation declines.
The group said it intends to focus on higher profitability businesses by considering the possibilities of restructuring the business through selling a group of subsidiaries that are engaged in coal business and China shipping business and it considers that the deal provides an opportunity to dispose of the loss making business and to take away the uncertainty from the coal business.
In addition, the group said a large portion of the revenue from the group’s China shipping business come from its coal business, and it is reasonable to dispose of the China shipping business together with the coal business. The average age of its fleet is 18 years.
After the disposal, Qinfa Group will principally be engaged in the provision of international shipping services.
China’s GDP growth has been decelerating which significantly affected the demand for coal-consuming products. Domestic coal prices have been following a severe downward trend. China’s severe air pollution challenges have led to policies and regulations to restrict coal use in coastal China and to accelerate the increase of alternative energy technologies. According to China’s Energy Development Strategy Action Plan (2014-2020), specific targets have been set out for the purpose of reducing coal’s share in primary energy consumption to 62% and increasing non-fossil energy’s share to 15% by 2020 and to 20% by 2030.