Rising China spot price to boost coal firms – UBS

Rising China spot price to boost coal firms – UBS

Listed Chinese coal companies are expected to outperform the broader market as China’s continued demand lifts spot prices in 2007, UBS metals and mining analyst Ghee Peh, said on Wednesday.

The average spot price of coal in China, the world’s largest producer and consumer of the fuel, is likely to rise 5 percent in 2007 compared with the year before, said Peh, an analyst at UBS Securities Asia Ltd.

The rising price will boost gross profits for listed coal firms, such as Hong Kong-listed Shenhua Energy and Yanzhou Coal , he said.

“As Yanzhou Coal sells 48 percent of its output at spot prices, the rising price benefits the company,” Peh told a roundtable meeting with reporters in Shanghai.

He said that improved prospects for the overall sector would be reflected in Shenhua’s stock price.

China’s coal producers and power plants agreed to lift term thermal coal prices this year by an average of 30 yuan ($3.86) a tonne, or around 10 percent.

Spot prices are expected to be supported by tighter government controls over small coal mines, and growth in thermal power generation, analysts have said.

China’s coal output increased 8.1 percent to 2.325 billion tonnes in 2006, with more than half of that being used by power plants.

Shares of Shenhua Energy were traded at HK$19.08 at Wednesday’s close, up 2 percent so far this year, while Yanzhou Coal rose near 16 percent to HK$7.27 since Dec 29, compared with a 0.7 percent rise on the benchmark Hang Seng Index .

($1=7.773 Yuan)

Source: Reuters

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