Impact on listed companies: Share prices of two mainland oil giants-China Petroleum & Chemical Corp. and PetroChina Co.-climbed upon the news. The markets expected the price hikes would cover some of their losses in the refined oil section, though it was still one third less than that of the international prices.

Other A-share listed companies were not so optimistic. Some complained the price hike would push up their production costs, and pose a negative impact on their revenue. For instance, Jiangsu Qionghua Hi-tech Co. Ltd. published a notice on June 23, noting this round of price hikes would add 1.15 million yuan ($164,000) to their costs in the second half of this year.

On airlines: Chinese airlines will have to bear the biggest burden. Tianxiang Investment Consulting Co. Ltd. estimated in its June 20 report that airlines’ profitability will deteriorate. The whole aviation industry is expected to spend an extra 10 billion yuan ($1.43 billion) on fuels. Earnings per share of Air China Co. Ltd., China Southern Airlines Co. Ltd., and China Eastern Airlines Corp. Ltd. will go down 0.15 yuan, 0.75 yuan and 0.45 yuan respectively, according to Tianxiang Investment Consulting.

However, National Business Daily cited an anonymous NDRC official stating that the government would come to the rescue. It was reportedly to raise fuel surcharge up to 50 percent of the original prices to offset losses incurred by airlines. Tianxiang argued the surcharge hike could only cover 60 percent of the cost surge.

On public transportations and railways: The prices of public transportation, taxi and railways were forbidden to rise, according to an NDRC emergency notice on June 23. It ordered local governments to strictly check the chain effects of oil and electricity price hikes.

The NDRC urged operators to find other ways to increase profitability, and vowed to cut tolls for vehicles carrying agricultural products.

Compromising on Iron Ore

China’s leading steel mill, Baosteel Corp. Ltd. agreed with Australian suppliers to an increase of 96.5 percent on iron ore prices, much higher than the 65-71 percent increase set with Brazilian suppliers. The agreement was reached after months of arduous negotiation as suppliers required higher freight fee.

Analysts expected the earnings of Chinese steel mills would go down, but the mills would quickly pass the cost surge onto consumers to offset the rising cost. The move would eventually jack up the runaway inflation.

Baosteel agreed on June 23 to pay 96.5 percent more to Australian Rio Tinto’s Pilbara Blend Lump for 12 months beginning April 1, 2008. In February, Baosteel had agreed to pay 65-71 percent more to Brazil’s Cia Vale do Rio Doce for ore fines.

The Australian side argued the shipping cost from Australia to China was much lower than that from Brazil to China, thus demanded a higher shipping fee from the Chinese side.