China's biggest listed coal producer, Yanzhou Coal Mining Co Ltd, said on Thursday that Japanese importers had agreed to a 71 percent price increase for the current year, beating market forecasts.
China, the world's second-largest coal exporter behind Australia, is expected to cut back exports by about 15 percent this year to cope with heavy demand at home from electricity generators and steel makers who are powering its racing economy.
Lower exports have pushed prices higher internationally, fattening profits of coal miners around the world, including Shangdong based-Yanzhou Coal, London-listed Xstrata Plc and Australia's BHP Billiton.
It also forced customers to look to other suppliers such as Vietnam.
Japan is China's biggest coal export market.
Yanzhou Coal said in a statement after annual talks with Japanese buyers that they had agreed the average contractual price in the current fiscal year to the end of March 2005 would be US $51.93 a tonne, up 70.6 percent from last year.
"This is positive news for the company and the contract price is higher than expected," said Lawrence Lau, an analyst at BOC International.
The market had previously estimated Yanzhou Coal's new contract price with Japan at an average of US $45-50 per tonne.
Japanese power and steel companies such as Nippon Steel and Kobe Steel Ltd are majors customers of coal imported from China, Australia and elsewhere.
Their profit margins are seen pressured by higher coal and other raw material costs, offsetting some of the profit surges they are seeing because of strong demand from China.
Yanzhou Coal said it had agreed to export 10.4 million tonnes of coal to Japan, representing about 87 percent of its planned coal exports of 12 million tonnes for this year.
The company cut its export target for this fiscal year by 12 percent to meet voracious demand at home. Industry sources said total Chinese exports were expected to fall 15 percent to 80 million tonnes.
Shares of Yanzhou Coal ended Thursday up 4.11 percent at HK $7.60. They have eased about 13 percent in the last three months, but have more than doubled in the last year.
"The stock is trading at a relatively low price earnings ratio and should rise above HK $8 when market sentiment improves," said Kenny Tang, an associate director at Tung Tai Securities.
The Hong Kong stock market has been overshadowed by expectations of a US rate rise and fears that China's recent policy to cool its economy may slow growth.
Yanzhou plans to sell a total of 41.41 million tonnes of coal this year against 40 million tonnes in 2003.
Energy-starved China is bracing for another summer of severe power shortages and has ordered miners to preserve thermal coal for domestic power generation to ease the electricity crunch.
Yanzhou Coal said it had agreed to sell 5.15 million tonnes of thermal coal to Japan this fiscal year, down 5.5 percent from the previous year. The agreed export price of thermal coal rose 65 percent to US $48.30 per tonne.
Yanzhou said it had agreed to export 5.25 million tonnes of semi-soft coking coal to Japan this fiscal year, up 0.4 percent. The agreed price rose 75.4 percent to US $55.50 per tonne.
Its domestic coal price jumped more than 30 percent in the first five months to 216.3 yuan (US $26) a tonne and sales in China rose 15.6 percent to 12.28 million tonnes from the same period last year, a Yanzhou spokesman told analysts in a conference call. Higher prices for everything from coal to oil and cotton are fuelling inflation for the goods China exports to Asian neighbours, the United States and elsewhere.
Kim Eng analyst Jimmy Lam said he planned to raise his 2004 earnings estimates for Yanzhou Coal "significantly" following the announcement of the new contract price.
He earlier forecast Yanzhou Coal's net profit to rise about 30 percent to 2.18 billion yuan (US $254 million) in 2004, up 57 percent from 1.39 billion yuan in 2003.
Comments
Comments are closed.