China's largest listed coal miner, Yanzhou Coal Mining Co Ltd, said yesterday its coal prices were likely to climb in the second half of the year, fuelled by continued strong demand for electricity.

Growth in China's steel and cement sectors will also push coal prices higher, despite government measures to cool the economy which are targeted at both industries, Yanzhou Coal said.

"We are optimistic on the coal price outlook," Zhang Baocai, the head of Yanzhou Coal's planning and finance department, said in an interview. "Although China has implemented a raft of measures to cool the economy, the steel and cement industries are expanding their production volumes. They will need more coal."

"Also, power plants are adding capacity and prices of thermal coal are unlikely to fall in this year and next," he said.

Coal demand in China - the world's largest producer and consumer of the mineral - is expected to grow to more than 1.7 billion tons this year from 1.608 billion in 2003 and in future will grow at about 100 million tons annually, Zhang said.

Yanzhou Coal said it expected earnings in the first three quarters of this year to rise by more than 50 per cent.

The firm, based in the eastern province of Shandong, reported net profit of 858.5 million yuan for the first nine months of 2003, based on Chinese accounting standards.

On Friday, it reported that first-half net profit jumped nearly 66 per cent to 1.22 billion yuan (US$147 million). Despite the strong results, shares in Yanzhou Coal fell 1.2 per cent to close yesterday at HK$8.30.

In the six months through Friday, Yanzhou shares have fallen 4 per cent, compared with a decline of more than 17 per cent in the H-share index of Chinese stocks listed in Hong Kong.

"We expect an even stronger performance in the second half. They will sell more coal and with higher prices," said UOB Kay-Hian analyst Foo Choy Peng, who rates Yanzhou a "buy".

China, the world's second-largest electricity consumer after the United States, is grappling with widespread blackouts and an estimated power shortfall of 40,000 megawatts this year. "In the second half of 2004, demand in both domestic and overseas coal markets (is) expected to remain strong and the price of coal is expected to move at a high level," the company said in a statement.

Coal prices in China surged by nearly 35 per cent in the first six months of the year, boosted by economic growth of almost 10 per cent and transport bottlenecks.

Yanzhou Coal said it expected its second-half coal sale price would be higher than in the first half, when it jumped 33 per cent from the year-earlier period to 227.88 yuan per ton. China recently allowed coal miners to raise contract thermal coal prices by up to 8 per cent.