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THE bone-chilling blizzards blanketing North Asia have sparked some red-hot trading opportunities in coal-related stocks.
Coal producers stand to profit substantially, as analysts expect prices to remain high this year due to supply shortages - amid soaring demand for coal-fired energy.
Prices of other key energy sources like oil are also set to stay high.
Yesterday, shares of coal mining firm Straits Asia Resources jumped 11.5 per cent to a record $3.89, after a benchmark Australian coal price hit another fresh high.
Another Singapore-listed counter, Noble Group, which owns coal mines in Australia, also surged 9.7 per cent to $2.03.
The bull charge in coal plays was not confined to counters here in Singapore.
Hong Kong-listed coal firm China Shenhua Energy gained 2.6 per cent, while Australia-
listed Centennial Coal added another 2.7 per cent after it surged 5.4 per cent on Friday.
The key trigger was that weekly coal prices soared 25 per cent to a record US$116.44 a tonne at Australia's Newcastle port - a key indicator for Asia.
Power-station coal prices there hit record levels for a second straight week, climbing US$23.09 for the week ended Feb 1, according to the globalCOAL Newcastle Index.
The recent sharp price increase was due largely to snowstorms in China that were causing a supply shortage, as coal transport was disrupted amid higher demand arising from the colder climate.
'It's all stemming back to China, where it looks as if they've got some real problems,' Sydney-based coal analyst Graham Wailes told Bloomberg News.
This was exacerbated by supply shocks resulting from power failures in South Africa and heavy rains in Australia - both coal producers.
Industry experts point out that the harsher Chinese winter has not only resulted in higher demand for coal but also hit China's own coal production and exports.
China, the world's biggest coal producer - reliant on coal for 78 per cent of its power - is limiting exports to alleviate its domestic shortage.
Coal prices rose 73 per cent last year, and analysts such as global ratings agency Fitch Ratings expect the price to stay high this year.
'Fitch does not foresee the coal price rising as sharply in 2008 as it did in 2007 but expects it to remain high, as suppliers will continue to struggle to meet the high demand from the Asia-Pacific region,' said its Jakarta-based associate director, Mr Jessie Wahab.
Fitch has a positive outlook this year for Indonesian coal producers riding on robust global demand and an increasing export volume.
The recent supply shocks have also led analysts to raise coal price forecasts.
Last week, JPMorgan upped its year's target of contract prices for power-station coal from US$70 to US$90 a tonne. It also raised forecasts for coal used in steelmaking from US$120 to US$140 a tonne.
Similarly, UBS also raised its price forecasts for thermal coal. It said contract prices could rise to US$100 a tonne this year and to $125 next year, an increase from its previous estimates of $90 and $110.
But it is not just coal producers that stand to benefit from the sky-high prices.
Shipping firms involved in the transport of coal, such as ASL Marine, Marco Polo Marine and Samudera Shipping Line, could also profit from them.
Recently, OCBC Investment Research upgraded Samudera from hold to buy.
It noted: 'They believe the consumption of raw materials like coal and manufactured goods by China, Europe and the United States is sustainable in the longer term as reflected by the ongoing strong demand for shipping services in these markets.'
alfoo@sph.com.sg
GROUND ZERO
The supply shocks are all tracing back to China, where it looks as if they've got some real problems, says Sydney-based coal analyst Graham Wailes.
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