China Growth Stocks

[redman_2014]

Businessweek - China Coal Seeing ‘Strong Demand’

April 13 (Bloomberg) -- China coal prices will increase this year as the nation’s industry expands and a drought in the southwest region reduces hydropower generation, said Puda Coal Inc. Chief Financial Officer Laby Wu.

“Demand is still strong,” Wu said in a phone interview from Beijing. “Prices will increase from 2009 due to strong demand for electricity generation. The southwest drought will also drive demand for thermal coal.”

China’s thermal coal prices jumped to an average 700 yuan to 800 yuan a metric ton in the fourth quarter from an average 400 yuan to 500 yuan for the year, she said. Benchmark coal prices at Qinhuangdao, China’s largest port handling the fuel, rose for the first time in 10 weeks on March 29 after the drought cut hydropower generation and raised demand from coal- fired plants.

Coal demand won’t be able to meet supply this year given a prediction from China’s top economic planning agency that electricity generation will grow 7 percent in 2010, while raw coal production will only rise 3 percent, Wu said.

China, the world’s biggest user and producer of coal, will remain a net importer of the fuel this year after buying for the first time last year as a nationwide safety crackdown closed about 1,000 small mines, Wu said.

Company Transition

U.S.-traded shares of Puda Coal have rallied 46 percent this year, spurred by the company’s transition into high margin mining production from low margin coal washing.

China’s demand for coal used to make steel is forecast to rise 5.6 percent to 38 million metric tons this year, according to Macquarie Group Ltd. last week.

Puda Coal expects mining of the fuel to comprise $20 million to $40 million in revenue this year and contribute profit of as much as $12 million after a zero input last year, Wu said.

Puda Coal is benefiting from the decision by the provincial government in Shaanxi, where the company is based, to put the company in charge of consolidating the industry including mine closures and mergers, Wu said. She expects the company to complete two mining acquisitions this quarter.

--Allen Wan. Editors: Richard Frost, Margo Towie

http://www.businessweek.com/news/2010-04-13/china-coal-seeing-strong-demand-puda-coal-cfo-says-update1-.html


-Adam