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雷达卡
20080819-BNP_Pairbas-China_Coal_Mining
More tariffs: the only shortage solution
Shortage: strong demand and restricted supply
We believe the coal shortage is primarily attributed to strong demand
growth over the past five years. The coal demand from power, steel and
cement grew at a CAGR of 13-22% in 2002-07, while coal supply only
increased at a CAGR of 11.6% in the same period. Coal production is
restricted, however, by small mines closures and resource depletion in
East China.
Policy must switch to power tariff increases
We believe current energy price controls on coal and power will only
increase demand and intensify coal shortages. Coal price controls are
meant to be short-term and are not sustainable. They were devised to
ensure the power supply in the summer peak season. A coal tax hike will
increase energy price-hike pressures. The only viable measure to slow
coal demand is by increasing power tariffs.
Coal no longer offers cheap energy in China
Increasing costs in coal mining is another major factor behind the coal
and power price increases. Coal production and transportation costs
have consistently risen over the past five years, while increases in safety
investments, labour costs and transportation distances are rigid, without
any downside possibility in the foreseeable future. We believe contract
coal prices will continue to climb relative to cost hikes, while spot prices
may weaken with possible demand slowdown.
BUY reserve in the long term
We like the contract coal suppliers with abundant reserves because
existing coal reserves will appreciate with more supply coming from
West China. Also, the production cost increases will support contract
prices in the long-term. Shenhua and China Coal trade at 33% and 22%
discount to DCF. And both EV/tonne of USD5.20-7.80/tonne (based on
reserve) is cheaper than regional peers’ average of USD9.20/tonne. We
stay NEUTRAL on China’s coal sector. Shenhua is our top BUY for its
strong reserves, integrated railway assets and cheap valuation.
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[此贴子已经被作者于2008-8-29 18:34:44编辑过]
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