June 5 (Bloomberg) -- China's stocks fell to the lowest in more than six weeks, led by coal producers and steelmakers on speculation the government will tighten price controls to fight inflation, cutting profits.

China Shenhua Energy Co. and Shanxi Lu'an Environmental Energy Development Co. declined. Baoshan Iron & Steel Co., China's biggest steelmaker, fell after canceling plans to charge customers more in the third quarter following a government order to keep prices unchanged.

``The biggest worry for investors today is inflation and what measures the government will take to limit it,'' said Gabriel Gondard, deputy chief investment officer at Fortune SGAM Fund Management in Shanghai, which oversees about $12 billion.

The CSI 300 Index, which tracks 300 stocks traded in Shanghai and Shenzhen, fell 34.78, or 1 percent, to 3,512.14 at the close, the lowest since April 23. Nine of the 10 industry groups on the index fell, led by energy and raw-materials.

The measure has declined 34 percent this year on concern six interest rate increases last year and curbs on bank lending and product prices will hurt profits.

Shenhua Energy, the nation's largest coal producer, dropped 6.2 percent to 42.87 yuan. Shanxi Lu'An, based in Shanxi province, tumbled 9.2 percent to 38.51 yuan, the most since March 18.

Pingdingshan Tianan Coal Mining Co., located in Henan province, declined 7.1 percent to 40.97 yuan.

The National Development and Reform Commission has set up a panel that will take charge of coal and oil price controls, ``strictly'' crack down on illegal price increases by coal miners after the May 12 earthquake and eliminate charges by middle-men, the Beijing Times reported today, citing an unidentified government official.

Price Crackdown

China's Shandong province yesterday imposed ``temporary'' caps on power-station coal prices before peak summer demand and the Olympic Games in August. Shandong-based Yanzhou Coal Mining Co. dropped 9.3 percent to 21.35 yuan.

Other major coal-producing provinces, including Shanxi and Inner Mongolia, haven't yet introduced coal price caps, the Beijing Times added.

Baoshan Iron fell 3.4 percent to 11.54 yuan. The company will keep prices unchanged ``at the second-quarter level,'' Chen Zudong, a sales official at Baoshan, said by phone today. The steelmaker had planned to raise prices for the three months starting July 1 to keep pace with global levels.

Baoshan will post lower third-quarter profit as ``iron ore and coal costs keep rising,'' said Luo Wei, a Shanghai-based analyst with China International Capital Corp.

Port Contract

Wuhan Iron & Steel Co., China's fifth-largest steelmaker, declined 3.6 percent to 14.24 yuan, while Liaoning-based Angang Steel Co. slid 1.8 percent to 19.65 yuan.

Shanghai Zhenhua Port Machinery Co., the world's biggest maker of quayside cranes, climbed 2.7 percent to 14.32 yuan, after winning a $350 million contract to supply steel structures for a wind-power station project in the U.K., it said in a filing to Shanghai's stock exchange.

The Shanghai Composite Index, which tracks stocks on the larger of the nation's two exchanges, fell 0.5 percent to 3,351.65. The Shenzhen Composite Index fell 1 percent.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net

Last Updated: June 5, 2008 04:27 EDT