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Eric Ng

Shares of mainland distributors of natural gas fell on Wednesday morning after the central government announced it would raise gas prices from September 1.
Investors are concerned the firms may have difficulty in passing on the higher cost to end-users.
ENN Energy led the decline with a drop of 4.1 per cent to HK$57 at 10.22am. China Resources Gas lost 1.7 per cent to HK$25.35, while Beijing Enterprises slid 1.8 per cent to HK$72.05, and China Gas eased 0.5 per cent to HK$15.72. The Hang Seng Index was up 0.3 per cent.
The National Development and Reform Commission, which regulates the energy industry and prices, said on Tuesday that non-residential gas prices would be raised by 40 fen (50.3 HK cents) per cubic metre at the city-gate level. Prices for residents and fertiliser makers will remain unchanged.

	Higher prices may weigh on China’s city gas distributors over producers

	Barclays analysts
The industrial sector typically accounts for about two-thirds of city gas distributors’ sales.
“Higher prices may weigh on China’s city gas distributors over producers, as margins soften and volume growth ebbs,” Barclays’ analysts said in a research note on Wednesday.
Credit Suisse analysts said in a note the price increase was at the high end of market expectations and that distributors will have a harder time passing on the costs this time around.
“The city gas sector corrected by 10 per cent following the [price] hike in July last year but recovered on the back of [an over 95 per cent] pass-through to end-users,” they said.
“A similar success rate may not be warranted this time with weaker industrial demand.”
They noted industrial natural gas demand grew only 9 per cent year on year this year’s first half, compared with 13 per cent in the whole of last year.
If distributors could pass through 90 per cent of the cost increase, Credit Suisse estimated the firms would suffer a 2 per cent fall in annualised profit. That would rise to 4 per cent if they could pass on 80 per cent, and 6 per cent if only 70 per cent could be passed on.


Gas distributors fall on imminent price increase

Investors are concerned that natural gas distributors may have difficulty in passing on the higher cost to end-users. Photo: Reuters

Beijing raises natural gas prices by 16pc

From September 1, the prices of natural gas at the city-gate level will be raised by up to 40 fen per cubic metre. Photo: Reuters

Business

Commodities

Shares of mainland distributors of natural gas fell on Wednesday morning after the central government announced it would raise gas prices from September 1.


Gas distributors fall on imminent price increase

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Shares of mainland distributors of natural gas fell on Wednesday morning after the central government announced it would raise gas prices from September 1.

Shares of mainland distributors of natural gas fell on Wednesday morning after the central government announced it would raise gas prices from September 1.