Coal news and updates

The HK$5.56 billion initial public offering of Qinhuangdao Port, the world's largest coal port, has been fully covered by investors in its international tranche as it kick-starts its Hong Kong share sale today, market sources said.The port operator for coal, iron ore and major dry bulk cargo had declined Brazilian iron ore giant CVRD's request to be a cornerstone investor, said a person familiar with the situation.

 

CVRD's 400,000-tonne iron ore vessels have been banned from berthing at mainland ports since December last year, seen as a bid to protect financially hit mainland shipping firms.

 

Cornerstone investors have already soaked up 42.7 per cent of the total offering. They are mainly the subsidiaries of coal and power plant companies using the port, including China Coal Hong Kong, China Datang Overseas and Guodian Fuel.

 

The company plans to offer 829.85 million shares at a price range between HK$5.25 and HK$6.70 per share. It will price the firm at 11 to 14 times projected earnings for next year, according to an analyst.

 

"Unlike container ports, major dry bulk cargo ports are more resilient to fluctuations in the global economy," an analyst said.

 

Mainland coal prices have increased as industrial activities rose last month.

 

Xing Luzhen, the chairman of Qinhuangdao Port, said recent policies announced by Beijing could help shore up the development of the coal industry.

 

"The measures could reduce the importation of high-sulphur coal into China and reduce local tax and charges on coal mines," Xing said.

 

The ports operated by the company in the Bohai Rim area deliver coal produced in Shanxi and Inner Mongolia to the coastal areas of south and east China, which account for 32 per cent of the total volume of seaborne coal in the country.

 

More than 60 per cent of the proceeds from the offering will be used for building two 200,000-tonne iron ore berths in Huanghua Port, in a bid to cater for the new production capacity by steel companies in Hebei. The company believes that once the ore port in Huanghua is completed, they will be able to divert iron ore throughput from Cangzhou, central and south Hebei, to obtain a leading position in ore throughput in the Bohai Rim.

 

The company also plans to extend its service to upstream coal trading, including setting up a coal trading market in Caofeidian Port.

 

The company's net profit increased 64 per cent to 1.2 billion yuan (HK$1.52 billion) in the first six months of this year from a year earlier. It handled 336 million tonnes of bulk cargo last year, down from 349.6 million tonnes in 2011.

 

 

 

Source: www.scmp.com