What's new? Inventories build, spot falls against 3Q seasonality - Investment cases are being challenged by data in the past month. Spot prices are falling and inventories at Qinhuangdao have increased to 6.6Mt, up 29% MoM. Prices have edged down to RMB575/t (6000Kcal) from RMB590/t, countering seasonality.
Coal Supply increases in May, +30% from Jan, up 5.8% MoM - We are seeing an increase in small mine production. On a national level Township mines production is up 5.5%MoM. Key state-owned mine production (twice as large as the townships) is up 7.7% MoM.
Shanxi Small Mines return, production up 39% MoM - One of the areas of surprise in 1Q09 was small mine production which was down 50% YoY. Production is now returning with production up to 17mtpm from lows of 7.2mtpm.
Resource Tax comes back to haunt and taunt coal names - Resource tax proposal is to be submitted to the NPC, according to www.financce.sina.com. The tax reform is to take place as the economy recovers. The reform may include: expanding the taxable item ranges (may include water and gold) and reform the taxing method (may change from tax by quantity to by price), according to MoF
The positives: June Power consumption up 3.79% YoY, generation up 4.7%
Implications: newsflow supportive of our Shenhua downgrade to Hold - With a lack of conviction of supply-demand balance and its implications for 2010 contracts. New information is confirming the negatives.
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