Shenhua seeks fresh price hikes
Updated: 2008-03-18 07:13
By Lillian Liu(HK Edition)
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China Shenhua Energy, the country's largest coal miner, said yesterday that it doesn't expect the size of this year's exports to change much, year on year, despite a 12 percent rise in production.
As China's top coal exporter, the company may export 24 million tons of coal this year - the same as last year - but at higher prices. The company is still negotiating with overseas buyers, Shenhua President Ling Wen said at a press conference yesterday.
"Our coal export last year was 24 million tons, and we expect the export volume to remain at the same level this year, but we hope to get better prices," Ling said. He did not give details about the price lift.
Goldman Sachs said in a research report that Shenhua's export prices were 398 yuan per ton in 2007, which was 4 percent higher from a year earlier. But the United States' investment bank estimates the company will lift its stock price by 24 percent this year.
Shenhua expects its coal output to reach 177 million tons this year, up from 158 million tons last year, Chairman Chen Biting said. Its 2008 sales could rise 7.1 percent to 224 million tons.
Miners across the world will be forced to further raise their selling prices in 2008 in order to maintain profitability, and the growing production cost is an alarm no one could afford to ignore, said Linus Yip, a strategist at First Shanghai Securities.
"The coal price throughout 2007 increased rapidly and will continue to soar this year," Yip said. "That isn't good news for coal miners, as the material and processing costs of coal fuel are increasing rapidly."
"Shenhua will face big challenges to maintain its profit growth in 2008," he said.
Shenhua raised coal prices more than 10 percent in the domestic market last year. However, the average production costs rose to nearly 14 percent in 2007, from 66.1 yuan per ton to 75.3 yuan per ton, according to Chen.
"We expect good domestic demand, supported by top consumers, such as power generators, construction and the chemical sector," he said.
China, the world's largest producer and consumer of coal, saw its consumption of coal, which generates about 80 percent of the country's power, rise 7.9 percent to 2.58 billion tons last year.
"We expect our cost to rise this year due to inflation, especially in raw materials. However, our contract prices increased as well," said Shenhua Chief Financial Officer Zhang Kehui.
"We are quite confident in being to maintain stable profit growth this year," she said.
Shenhua announced on Sunday that its net profits rose 16.6 percent last year to 20.58 billion yuan from 17.64 billion yuan in 2006. Sales rose 26 percent to 82.11 billion yuan.
(HK Edition 03/18/2008 page2)