The only profits in China are mining profits
Mining is the only sector of the economy showing consistent profits this year. The biggest gains are in coal, and oil and gas, but lithium and silicon miners are enjoying windfalls thanks to the electric vehicle and solar energy industries, and copper and uranium mining have been lucrative, too.
According to data released over the weekend by the National Bureau of Statistics (NBS), of the total profit of 4.89 trillion yuan ($711.49 billion) reported by domestic enterprises in the first seven months of the year:
- The manufacturing industry accounted for 3.62 trillion yuan ($526.64 billion), a decrease of 12.6% year-on-year;
- Electricity, heat, gas, and water production and supply industries accounted for 275.12 billion yuan ($40 billion), a decrease of 12.5%; and
- The mining industry accounted for 996.11 billion yuan ($144.84 billion), an increase of 1.05 times.
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Mostly coal, and oil and gas
Profits have declined so far in 2022 in all sectors except mining. Most of these profits were accounted for by coal, and oil and gas.
- According to the NBS, profits from coal mining and profits from oil and gas increased by 1.41 times and 1.19 times year-on-year, respectively.
- Of the total mining profits of 996.11 billion yuan ($144.84 billion) so far this year, the coal mining and washing industry accounted for the largest share, 630 billion yuan ($91.60 billion).
- A total of 198.15 billion yuan ($28.81 billion) of the rest was accounted for by oil and gas profits, in particular at China’s three major oil and gas firms, namely, PetroChina 中国石油, Sinopec 中国石化, and China National Offshore Oil Corporation (CNOOC) 中国海洋石油. Collectively, profits at these three firms increased by 18.4% year-on-year.
Fastest growing: The rush for lithium and silicon
Due to massive demand from the new energy vehicle (NEV) and photovoltaic industries, as well as a global shortage of supply, the prices of lithium carbonate and high-purity silicon have risen relentlessly over the last few years, providing the companies that mine and sell these minerals with astronomical profits. From about 40,000 yuan ($5,816) per ton in September 2020, the price of battery-grade lithium carbonate hit a record high of 503,000 yuan ($73,142) per ton in April this year. Unsurprisingly, electric vehicle and battery manufacturers are now increasingly rushing to get their hands on their own lithium mines: A local newspaper counted at least 20 investments in lithium mines by companies such as CATL 宁德时代 and BYD 比亚迪 from July 2021 to July this year; nine of these investments that announced transaction amounts had a cumulative value of 11 billion yuan ($1.59 billion).
The vast majority of the lithium-mining profits, however, are flowing into the pockets of China’s largest lithium-mining companies, Tianqi Lithium 天齐锂业 and Jiangxi Ganfeng Lithium 赣锋锂业. And the profits are mouthwatering:
- In the first half of this year, Tianqi Lithium expects a net profit of up to 11.6 billion yuan ($1.68 billion), a year-on-year increase of up to 13,420%.
- In the first quarter of this year, Ganfeng Lithium reported a net profit of 3.52 billion yuan ($512.57 million), a year-on-year increase of 640.41%.
In July, the price of high-purity silicon used in solar panels surpassed 300,000 yuan ($44,471) per ton, a record high. Tongwei Group 通威集团, the leading domestic supplier of high-purity silicon, is one of China’s most profitable companies. For the first half of the year, Tongwei expects net profits of up to 12.5 billion yuan ($1.85 billion), a year-on-year increase of up to 321.48%, which would represent an average net profit of 69 million yuan ($10.22 million) per day for the whole first half of the year.
Others: Copper and uranium
Copper is another mineral that is benefiting from the photovoltaic production chain, as 1 gigawatt (GW) of photovoltaic production requires about 5,000 tons of copper. Domestic copper miners have likewise reported large profits for the first half of the year.
- Jiangxi Copper 江西铜业股份, China’s largest domestic copper miner, reported a net profit of 3.467 billion yuan ($504.14 million), a year-on-year increase of 13.92%.
- Zijin Mining Group 紫金矿业 expects a net profit of up to 12.63 billion yuan ($ billion), a year-on-year increase of 90%, and copper accounted for nearly 55% of the company’s total profit.
- Yunnan Copper 云南铜业 expects a net profit of up to 750 million yuan ($109.05 million), a year-on-year increase of up to 197%.
The outbreak of the Russia-Ukraine War in February this year has caused countries around the world to make new investments in coal to ensure stable energy supply, but also in nuclear energy, and this has caused a steep increase in uranium-mining profits. China currently has 54 nuclear power plants in operation and 23 plants under construction, and by 2025, China’s installed nuclear power capacity is expected to reach about 70 million kilowatts.
Last Thursday, CGN Mining 中广核矿业, one of the listed entities of China General Nuclear Power Group 中国广核集团, China’s largest nuclear power company, announced a net profit for the first half of the year of HK$355 million ($45.23 million), a year-on-year increase of 886%, mainly due to the increased demand for uranium.