Coal rises as foreign coal promotion event delayed
China’s first international coal fair, originally planned for March, has been postponed until April. The nation’s five largest power companies, and China Resources Power Holdings (HK:00836), another of the top ten, expected to squeeze the domestic coal price by sourcing orders of overseas coal at the fair. Coal shares rose an average seven percent on news of the postponement.
As the world’s largest coal producer and user, China consumed 2.7bn tonnes of coal in 2008, but exported only 5m tonnes. As total international coal exports were 900m tonnes, the small proportion accounted for by China means the foreign companies represented at the fair would have greater bargaining power.
China’s coal imports increased 11.5 percent in the first two months of this year compared to the same period of 2008, as generators bought coal from Australia, Vietnam and Indonesia.
A senior manager with one of the top five generators said coalminers and power generators may agree a compromise on price before the coal fair is held next month.
The coal price however is not likely to rise in the near term, as supply still exceeds demand. During the first two months of 2009, coal production increased 3.6 percent year on year while electricity generation fell by 6.5 percent. China’s heating season will end in March, while many coal mines undergoing refitting programmes will soon resume production.
Coal shares rose seven percent on average. Shanxi Guoyang New Energy Co (SH:600348), Shanxi Lu'an Environmental Energy Development Co (SH:601699), Anhui Hengyuan Coal Industry and Electricity Power Co (SH:600971) and Shanxi Lanhua Sci-Tech Venture Co (SH:600123) all surged to the 10 percent trading cap. Huolinhe Opencut Coal Industry Co (SZ:002128) rose 7.09%.
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