Muted coal demand dents China Railway Corp.profit

China Railway Corp. posted a 34.8 percent profit drop year on year due to decreased freight caused by muted coal demand, a report said Tuesday.

The state-owned railroad operator's total profit stood at 39.65 billion yuan (5.75 billion U.S. dollars) last year, National Business Daily reported, adding that its gross revenue declined by 0.97 percent year on year to 907.45 billion yuan.

"Coal products account for more than half of all railway freight. Any drop in coal demand will impact railway freight revenue significantly," said Zhao Jian, a professor with Beijing Jiaotong University.

The company's freight revenue totaled 257.48 billion yuan in 2016, decreasing for a third year in a row.

In 2016, however, passenger train services contributed more revenue than freight for the first time in three years. Passenger revenue hit 281.75 billion yuan, up 12.4 percent year on year.

As a result, the company's net profit rose to 1.08 billion yuan in 2016, up from 681 million yuan a year before.

China aims to cap coal consumption at 4.1 billion tonnes by 2020 and use cleaner fuel to boost green growth. By 2020, the share of coal in the country's energy mix should fall below 58 percent, according to the energy sector's five-year plan for 2016-2020, released by the National Development and Reform Commission and the National Energy Administration.

Coal accounted for 64 percent of primary energy in 2015.

The share of non-fossil fuels will rise to more than 15 percent and the share of natural gas should reach 10 percent.

The country's push for cleaner energy is partly a response to smog in northern China, which prompted the government to step up efforts in the war against pollution.

Substances directly related to coal burning are health hazards, including sulfates and soot, major components of PM2.5, airborne particles smaller than 2.5 microns in diameter. Endi