Reconstruction generating additional business
Reconstruction work underway in many provinces hit hard by the nation's worst winter in 50 years is generating additional business in a range of industries, with stock and metals prices rising along with increased demand.
At the top of the list are power equipment makers. Rebuilding the damaged power grid in snow-ravaged regions is increasing needs for equipment used for power transmission.
Shao Yukai, an industry analyst at Industrial Securities in Shanghai, says "a sharp increase in demand for power equipment will generate more than expected profits for listed companies."
Domestic building suppliers are also increasing output of cement and steel to provide needed materials.
Stocks for listed companies show that demand and production is high. Anhui Conch Cement Co rose an aggregate 8.7 percent to 67.43 yuan ($9.48) per share, while Hunan Huayin Electric Power Co climbed a total of 7.6 percent over a month ago to 8.2 yuan.
Analysts say the unusually heavy snowstorms revealed that the country's infrastructure is unable to withstand extremely severe weather conditions, a realization that has prompted the central and local governments to improve designs and construction.
Luo Guo, an analyst on the building materials industry at Orient Securities in Shanghai, notes that "reconstruction of damaged infrastructure poses an urgent need for many building materials" but the demand is temporary.
"When reconstruction work winds up, the demand for building materials will show a gradual decline that may bring the production and profit of those companies to their usual levels," Luo says.
"The reconstruction work will benefit relevant industries in the short term," says Liu Jiangang, an analyst at Industrial Securities in Shanghai. "The growth opportunities brought to some industries is just a temporary factor to consider,"
Ma Keming, an analyst on the steel industry at Huatai Securities in Nanjing, says many steelmakers in the country have increased production to meet demands in rebuilding work.
"Steelmakers will give priority to products used for repairing the power network," says Ma. "That will drive up the industry's earnings."
Rebuilding work is also likely to push base metal prices to new heights.
The most actively traded copper futures contracts on the Shanghai Futures Exchange for delivery in May have surged an aggregate of 17 percent to 69,220 yuan per ton since late January.
Aluminum and zinc futures contracts have also seen a jump in prices. The most actively traded aluminum contract for May delivery rose 6.3 percent last month to 19,835 yuan per ton, while zinc contracts for the same delivery month soared 12.6 percent to 21,665 yuan per ton from a month ago.
"Serious power interruption forced many base metals makers in provinces hit hard by recent snowstorms to suspend part or all of their production," says Liu Minda, an analyst on nonferrous metals at Huatai Securities.
Many nonferrous metal product makers are set to expand their output and expected to increase earnings over the coming months.
"The suspension of production (caused by snowstorms) upset the balance of supply and demand, which will further exacerbate the surge in prices."
相关内容：
