China Coal Stocks Decline in Hong Kong on Export Tax Changes

By Winnie Zhu

Aug. 19 (Bloomberg) -- Chinese coal stocks, led by China Coal Energy Co., fell in Hong Kong trading for a second day after the government said it will increase export taxes on the fuel to bolster domestic supply amid an electricity crisis.

China Coal, the nation's third-biggest producer of the fuel, dropped as much as 4.7 percent to HK$11.38 ($1.46), the lowest since March 20. The stock was at HK$11.48 as of 11:41 a.m. local time. Yanzhou Coal Mining Co. declined by 3 percent and China Shenhua Energy Co., the largest coal producer, fell 2 percent.

The government said last week it will impose a 10 percent export tax on power-station coal and double the rate on coking coal, used in steelmaking, to 10 percent on Aug. 20. The country is grappling with its sixth year of electricity shortages caused by insufficient coal supplies and grid infrastructure while the economy expands at a double-digit pace.

``Coal stocks are falling because of the news, but we've checked with those companies and they said they will be able to transfer part of the tariff costs to customers,'' Michael Wang, chief coal analyst at Orient Securities Ltd., said by telephone in Shanghai.

The short-term impact on coal exports may be limited. The change in tax policy will affect ``a very small portion'' of spot sales while coal producers remain committed to exporting volumes stated under existing term contracts, Wang said.

China said yesterday it will take additional steps to boost domestic production and supply of coal to help ease the country's electricity crisis. China, the world's second-biggest energy consumer after the U.S., relies on coal for almost 80 percent of its power generation.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.