In China's energy market, coal is king. On Hong Kong's stock exchange, Chinese coal stocks reign supreme.
Yesterday, the three coal company H shares listed in Hong Kong all rose sharply - China Coal Energy rose 5.55 per cent, China Shenhua Energy 6.26 per cent and Yanzhou Coal Mining 4.79 per cent. China Coal Energy is now up 149 per cent from its December 2006 listing price. Shenhua and Yanzhou have also done well this year, easily eclipsing the recent lacklustre performance of other H-share favourites such as China Mobile, Ping An Insurance and even Sinopec Corp (see chart).
Yesterday's upward spurt was propelled by the news that a clutch of mainland exporters had successfully forced a 28 per cent price rise on to their Japanese customers. This year Japanese buyers will have to pay a hefty US$67.90 a tonne for Chinese thermal coal, the sort burned in power stations. Last year they were paying only US$52.97 a tonne.
The price agreed was well above the ceiling of US$65 that Japanese buyers had initially said they were prepared to accept. Some, however, may end up paying even more. Not every Chinese exporter signed up to the agreement. A few, including Yanzhou, remained aloof and are rumoured to be holding out for prices as high as US$75 or even US$80 a tonne. Meanwhile, the price of coking coal, used for smelting iron ore, has risen by about 40 per cent over the past 12 months.
The immediate cause of the price hikes was Beijing's decision last year to scrap tax rebates on coal exports, making shipments to foreign buyers more expensive. But the rise in prices also reflects China's growing demand for coal.
The country is by far the world's biggest miner and burner of coal. Last year, Chinese mines produced an impressive 2.4 billion tonnes of the stuff, up 8 per cent on 2005.
