China utilities to benefit from Baltic index slide

The Baltic Dry Index's 60% drop in the past five weeks, part of a slide that's taken it to levels last seen 25 years ago, is a likely benefit to China's private-sector power utilities, which are heavily coal dependent, according to Deutsche Bank research Thursday, Market Watch reports. Domestic shipping rates, about 39% below average levels in 2011, are likely set to remain suppressed for some time, the research broker said, noting that 30% of the sector's thermal coal needs is shipped by sea. Deutsche has an upbeat view on all five of China's listed independents, but is particularly favorable towards Huaneng Power and China Resources Power Holdings, which have the highest proportion of power plants in coastal areas. The cost of coal shipped by sea should drop about 2%, but when other savings are factored in, average spot coal prices are likely about 7% cheaper than last year's levels, Deutsche said.