Bloomberg cited Ms Laby Wu CFO of Puda Coal Inc as saying that China coal prices will increase this year as the nation industry expands and a drought in the southwest region reduces hydropower generation.
She said “Demand is still strong. Prices will increase from 2009 due to strong demand for electricity generation. The southwest drought will also drive demand for thermal coal.”
Ms Wu said Coal demand won’t be able to meet supply this year given a prediction from China top economic planning agency that electricity generation will grow 7% in 2010, while raw coal production will only rise 3%. China will remain a net importer of the fuel this year after buying for the first time last year as a nationwide safety crackdown closed about 1,000 small mines.
According to Macquarie Group Ltd last week US traded shares of Puda Coal have rallied 46% this year, spurred by the company transition into high margin mining production from low margin coal washing. China demand for coal used to make steel is forecast to rise 5.6% to 38 million tonnes this year.
Ms Wu said Puda Coal expects mining of the fuel to comprise USD 20 million to USD 40 million in revenue this year and contribute profit of as much as USD 12 million after a zero input last year. She said that Puda Coal is benefiting from the decision by the provincial government in Shaanxi, where the company is based, to put the company in charge of consolidating the industry including mine closures and mergers. She expects the company to complete two mining acquisitions this quarter.