China Coal Stocks Decline on Government Order to Curb Prices

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Jun 2010

China Coal Energy Co. led Chinese coal stocks lower in Hong Kong and Shanghai trading after the government told producers to keep prices of the fuel "stable" as part of efforts to control inflation.
China Coal, a unit of the nation's second-biggest producer, fell as much as 6 percent in Hong Kong and was trading at HK$10.68 at 11:05 a.m. Yanzhou Coal Mining Co., the fourth- biggest supplier, declined as much as 4.1 percent. The benchmark Hang Seng index gained 0.7 percent. Both stocks declined more than 1 percent in Shanghai.
China's coal companies were ordered to keep prices agreed in annual supply contracts stable as the government seeks ways to manage inflation, the National Development and Reform Commission, China's top economic planner, said on June 25. Consumer prices rose 3.1 percent in May, the quickest pace in 19 months, according to government data released June 11.
"This amounts to a cap on coal prices and this has affected sentiment for coal stocks," said Michelle Leung, an analyst at CIMB-GK Securities in Hong Kong. "Coal companies are still making good profits, but there's no indication as to how long they may have to cap prices which raises concerns about future margins," she said.
Coal prices rose about 30 percent in the first six months compared with the same period last year as China's economy rebounded, according to Leung. Curbs on coal prices will help reduce costs at state-owned companies, Leung said.

Source: Bloomberg