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Chinese drought putting upward pressure on Chinese coal stocks.

Recs

3

March 30, 2010 – Comments (0) | RELATED TICKERS: YZC , RTP.DL , BHP

Ok lets see China gets 80% of its electricity thru Coal.
That makes both YZC & LLEN in the right place at the right time. You know they say location is everything in business.

Demand of Coal is currently outstripping Supply in China and even more so with the current drought.
Note the massive importing of coal by China.

China’s Stocks Rise to Two-Month High; Commodity Producers Gain
March 30, 2010, 4:22 AM EDT
http://www.businessweek.com/news/2010-03-30/china-s-stocks-rise-to-two-month-high-commodity-producers-gain.html

March 30 (Bloomberg) -- China’s stocks rose, sending the benchmark index to the highest in two months, as signs of a faster global economic recovery and rising coal demand overshadowed concerns the government may increase interest rates.

Jiangxi Copper Co., China’s biggest producer of the metal, climbed 1.4 percent on higher U.S. consumer spending. China Shenhua Energy Co. and China Coal Energy Co., the nation’s top two coal producers, gained at least 0.7 percent as a drought in the south spurred coal demand for electricity generation. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, led shipping lines lower after freight rates dropped.

The Shanghai Composite Index rose 4.67, or 0.2 percent, to 3,128.47 at the close, after changing directions at least 10 times. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, added 0.2 percent to 3,366.71.

“The broader market is still in a fluctuating pattern,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai. “There’s no big catalyst for it to break out of the current level as the tightening concern is still lingering.”

The Shanghai gauge has lost 4.5 percent this quarter, the fourth-worst performer globally among 93 benchmark indexes tracked by Bloomberg, after China twice ordered banks this year to set aside a larger proportion of their deposits as reserves and re-imposed a sales tax on property sales to avert an asset bubble. China’s central bank advanced record 9.59 trillion yuan ($1.4 billion) of new loans last year to boost domestic demand amid shrinking exports due to the global financial crisis.

‘Break Out’

China’s stocks may “break out” in the second half, buoyed by easing tightening concerns and a possible appreciation in the yuan, Morgan Stanley said.

“Because we think growth will remain robust and inflation will ease in the second half, the market could break out with tightening concerns easing with lower inflation,” analysts led by Jerry Lou wrote. “Given the strong momentum in China’s domestic economy and the already recovering export sector, we think even a double dip in developed economies in 2010 would not derail China’s growth.”

China’s consumer prices are expected to rise 2.6 percent from a year earlier in March, Citic Securities Co. said in a note yesterday. The official data is due on April 15.

The nation’s policy “normalization” will carry on as the government raises banks’ reserve ratio requirements and interest rates, Citic said.

Coal Stocks Gain

Shenhua, the nation’s largest coal producer, gained 1 percent to 29.33 yuan. China Coal Energy Co., the second largest, added 0.7 percent to 11.91 yuan. Datong Coal Industry Co., the third largest, climbed 1.9 percent to 37.43 yuan.

Prices for coal rose 0.7 percent to between 675 yuan and 685 yuan a metric ton as of today compared with a week earlier, data from the China Coal Transport & Distribution Association showed. That’s the first increase since January 11. A drought in the south cut hydropower generation and raised demand from coal- fired plants.

A measure of six industrial metals traded in London gained 3 percent yesterday, the most since Feb. 16. Crude oil rose 2.7 percent in New York and gold added 0.6 percent.

Jiangxi Copper rose 1.4 percent to 35.98 yuan. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, added 0.9 percent to 19.38 yuan.

Shippers Drop

China Cosco dropped 0.4 percent to 12.88 yuan. China Shipping Development Co., a unit of China’s second-biggest sea- cargo group, slid 0.6 percent to 12.95 yuan. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, fell 0.6 percent to 4.75 yuan.

The Baltic Dry Index tracking transport costs on international trade routes fell 2.5 percent yesterday, according to the Baltic Exchange. That’s a 10th straight drop and brings the current decline to 15 percent.

The CSI 300 utilities index slipped 0.4 percent, the most among 10 industry groups. China Yangtze Power Co. fell 0.9 percent to 12.59 yuan. Zhongshan Public Utilities Science & Technology Co. slid 0.333 percent to 28.42 yuan.

The months-long dry spell in southwest China has affected 61.3 million residents and 5 million hectares of crops in the area, according to Xinhua News Agency. The drop in hydropower also caused less electricity transmission from the west to the eastern regions and led to higher output from coal-fired plants along the coast, the China Coal Transport & Distribution Association said in a separate report.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

China CSSC Holdings Ltd. (600150 CH), the unit of the nation’s biggest shipbuilder, dropped 3.1 percent to 70.13 yuan after saying 2009 net income fell 40 percent to 2.5 billion yuan on sales that dropped 8.7 percent.

Harbin Air Conditioning Co. (600202 CH) slid 8.1 percent to 20.80 yuan, the biggest drop since Aug. 31. It’s the biggest decliner on the Shanghai Composite Index. Net income for 2009 dropped 49 percent from a year earlier to 141.7 million yuan, Harbin Air said in a statement.

Offshore Oil Engineering Co. (600583 CH), the unit of the country’s third-largest oil producer, dropped 1.5 percent to 9.98 yuan. The company had its stock recommendation downgraded to“outperform” at Citic Securities Co., which cited lower- than-estimated 2009 profit and declining margins.

Shaanxi Baoguang Vacuum Electronic Apparatus Co. (600379 CH) jumped by the 10 percent daily limit to 18.57 yuan. The company will sell its low-voltage switch operation to an affiliate for 58.4 million yuan to avoid competition with the group company, Baoguang Vacuum said in a statement.

Zijin Mining Group Co. (601899 CH), China’s largest gold producer, lost 1.1 percent to 8.26 yuan after the company said it was notified today by the China Securities Regulatory Commission that it is being investigated in relation to “the violation of law and regulations of information disclosure.”

--Zhang Shidong. Editor: Allen Wan, Linus Chua

To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net

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