Falling volume sales and rising costs at Yanzhou Coal Mining in the first half have prompted JP Morgan to cut its earnings forecast for this year and next and downgrade the stock from 'over-weight' to 'neutral'. Earnings per share (EPS) were 38 fen, up by 44 per cent year on year due to strong coal prices, 57 per cent higher. Costs were up more than 20 per cent in spite of a 13 per cent fall in volume sales. Yanzhou Coal is unlikely to reach its full-year production target of 38 million tonnes because of delays in the relocation of the surface village. Management is unable to give analysts its production targets for this year and 2006 or indicate whether it can control rising costs. JP Morgan says lack of volume growth means earnings are unlikely to increase in the next 12 months. It cut its estimated EPS for 2005 by 5 per cent to 83 fen and for 2006 by 4 per cent to 80 fen. It also cut its target share price from $8 to $6.60. The counter closed on Friday at $5.75.