HONG KONG - China Shenhua Energy Co Ltd, China's largest coal producer, expects to sell 360 to 370 million tons of coal in 2011, up from its previous forecast of 350 million tons, its chairman said.

Zhang Xiwu gave the forecast during a news conference on Monday after announcing full-year results.

Like peers Yanzhou Coal Mining Co Ltd and China Coal Energy Co Ltd, Shenhua will likely benefit from higher global coal prices after Japan's earthquake and tsunami raised concern over the use of nuclear energy.

Some analysts expect spot coal prices in China, which relies on the fuel for 70 percent of its energy needs, to rise 15 percent this year and 10 percent next year.

Production costs will come under pressure from external factors in 2011, Zhang said.

"Pressure from production costs will intensify for two reasons we cannot control. One is that a resources tax may be implemented and the other is price adjustment funds collected by the government," he said. "These two factors are quite big, so we hope the (increase in) coal unit prices will be controlled within 10 percent."

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Shenhua posted an October-December net profit of 8.65 billion yuan ($1.32 billion) versus 5.7 billion yuan a year earlier, based on Reuters' calculations using the company's announced full-year figures. Fourth-quarter earnings were largely in line with a consensus forecast of 8.8 billion yuan.

Going forward, the coal major's gross profit margin is likely to come under pressure, Zhang said, because of potentially unfavorable trading conditions with coal suppliers.

China's thermal coal import volumes are likely to fall on a year-on-year basis, Shenhua said, with spot prices in the Asia-Pacific region remaining high and thus weakening the relative price advantage of imported coal over domestically produced coal.

Shenhua's forward price-to-earnings ratio stands at 13.3 for 2011, higher than Yanzhou Coal's 11.3 but lower than Peabody Energy's 15.

Reuters