Transaction Motive

The merger creates one of China's largest energy and chemical conglomerates with combined revenue exceeding 280 billion RMB and total assets surpassing 550 billion yuan. The restructuring came as a strategic response to persistent coal market challenges that had plagued both groups throughout 2024, including stubborn domestic oversupply and consistent price declines that drove sharp profit reductions across their operations. Pingmei Shenma's flagship coal subsidiary, Pingdingshan Tianan Coal Mining, saw its net profit plunge 81.5% year-on-year to just RMB 258 million during the first half of 2024, while Henan Energy's major coal subsidiary, Henan Dayou Energy, registered a dramatic net loss of RMB 852 million in the same period, some RMB 362 million larger than its loss the previous year.​

Complementary Strengths Drive Integration

The consolidation brings together two energy giants with complementary but distinct competitive advantages. Pingmei Shenma, formed in 2008 through the merger of Pingmei Group and Shenma Group, has built its reputation as China's largest coking coal production base with approximately 3 billion tonnes of coal reserves and the most complete varieties of coking and thermal coal in the domestic market. However, the group's true competitive edge lies in its dominance of the nylon chemicals sector, where it operates as the world's largest producer of nylon 66 industrial yarn and tire cord fabric, Asia's largest producer of nylon 66 salt, and China's largest nylon chemical production base overall. The group is aggressively expanding its chemical footprint through its ambitious "China Nylon City" project in Pingdingshan, targeting 600,000 tonnes per year each of caprolactam, adipic acid, and combined nylon 6 and nylon 66 chips by 2026, with a projected annual output value of 50 billion yuan.​

Henan Energy Group brings significantly larger coal resources to the combination, with 28.4 billion tonnes of total coal reserves spread across 52 mines with combined annual capacity of 88.65 million tonnes. More importantly, the group contributes substantial coal gasification and chemical manufacturing capabilities that complement Pingmei Shenma's nylon focus. Henan Energy's chemical portfolio spans multiple platforms including Zhongyuan Dahua Company in Puyang, which produces ammonia, urea, methanol, ethylene glycol, and melamine; the Yima Gasification Plant with 500,000 tonnes per year of methanol capacity using Air Liquide (formerly Lurgi) gasifiers; and Henan Golden Earth in Luohe with 450,000 tonnes per year of ammonia production using advanced Jinhua 3.0 gasification technology. The group has been strategically pivoting toward advanced polymer materials, biodegradable plastics, electronic chemicals, and hydrogen energy clusters as part of China's broader industrial upgrading and decarbonization push.​

Post-Merger Structure and Rationale

Following the November 7, 2025 framework agreement, both groups maintain independent operations and their respective subsidiaries continue under their original corporate frameworks, though Pingmei Shenma exercises management control through Party Committee appointments that became effective October 10, 2025. The combined entity now controls seven publicly listed companies including Pingmei Shares, Shenma Shares, Yicheng New Energy, Silane Technology, Dayou Energy, and Jiutian Chemical on the Singapore Exchange, plus six specialized enterprises on China's New Third Board.​​

According to Zhou Lisha, a researcher on China's state-owned enterprises, the strategic restructuring helps both groups eliminate excess capacity, increase industry integration, and enhance competitiveness in an oversupplied market. The transaction aligns with Beijing's broader policy encouraging SOE consolidation to optimize resource allocation in strategic sectors, similar to China Shenhua Energy's August acquisition of 13 coal-related assets from its state-owned parent China National Energy Group to enhance resource reserves and operational integration. Market observers suggest the move reflects Henan province's strategy to support the development of leading miners capable of weathering prolonged industry downturns while building stronger positions in higher-value chemical manufacturing segments.