Tuesday, March 4, 2008

Reconstruction Work in China Creating Extra Business

by Richard York

China experienced the worst in a century snowstorm and winter which hit the infrastructure, agriculture, and normal life hard in the New Year. The Chinese government has initiated reconstruction work in many of its provinces that were badly hit by the snowstorm and winter and this reconstruction work is now generating extra business in a variety of industries. Prices of stocks and metal are also climbing up with growing demand. Manufacturers of power equipment are on the top of the list in the additional business generated by the reconstruction efforts. Reconstructing the broken down power grid in the snow destroyed provinces and regions is adding demands for machinery needed for power transmission.

An industry analyst with Industrial Securities in Shanghai, Shao Yukai expressed that a steep growth in the demand for power machinery will create more than the estimated profits for the listed companies. Building material suppliers in the country are also working to increase their production of cement and steel so that they can supply the materials towards the rebuilding efforts going on in the provinces in the country. The stock figures of the listed companies indicate that demand and production for their materials is high in the market.

The stock price of the Anhui Conch Cement Company climbed a total of 8.7% to 67.43 Yuan that is $9.48 per share, whereas the price of Hunan Huayin Electric Power Company rose by an aggregate of 7.6% earlier a month to 8.2 Yuan. Industry analysts say that the extraordinarily severe snowstorms have ripped apart China’s infrastructure facilities and has also shown that such infrastructure facility of the country cannot survive the harshest of weather conditions. The central and the local government now have come to know this fact and it has also driven them to strengthen design and construction in the country.

An analyst in charge of the building materials industry at Orient Securities in Shanghai, Luo Guo, noted that rebuilding of the snow ravaged infrastructure facilities in the country assumes an immediate need for different building materials and he also added that this demand in the material is not long lasting. Once the rebuilding work is over the demand in building material will witness a steady drop which can bring down the production and profit of the manufacturers to their usual levels, the analyst further added.

Another analyst with Industrial Securities in Shanghai Liu Jiangang expressed that the rebuilding work will add to the coffers of the concerned industries in the short period of reconstruction. He further added that the chances of growth available to some industries in the country are only a short term element to take into account. A steel industry analyst with Huatai Securities in Nanjing, Ma Keming said that many of the steel manufacturers in the country have enhanced their production so that demands in the reconstruction work can be fulfilled. The reconstruction work will also possibly increase the prices of base metal to greater heights. The futures contracts for aluminum and zinc have also witnessed a rapid increase in prices.

 

 

 

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