The State Council is drafting a national plan for coal reserve bases to build up a national coal reserve mechanism.

Qian Pingfan, from the Development Research Center of the State Council (DRC), told 21st Century Business Herald that they are working out schemes for the national coal reserve mechanism while a national network of coal reserves would be constituted.

Zhejiang and Shandong, the two major coal consuming provinces, have already started building pilot coal reserve bases.

Wu Guochao, chairman of Zhejiang Provincial Energy Group Co Ltd, said in January the company plans to build a coal reserve base with a capacity of about 3 million tons.

Shandong provincial government has approved construction of Shandong seaport coal storage and dispatch logistic base invested by Longkou Mining Group Co Ltd and Longkou Port Corporation Ltd in January.

With investment of 530 million yuan in first stage, the logistic center will have an annual capacity of storing and dispatching 10 million tons of coal and 50 million tons once completed. It will ensure coal supply for over 50 percent of Shandong Peninsula.

Qian said enterprises would be the major operators of the national coal reserve mechanism, led by the government.

"The reserve bases will give priority to some regions and enterprises in urgent need when coal is in tight supply," he said.

Since last August, the Chinese government has started revising coal legislation to include a strategic coal reserve by 2015.

The amended Law on the Coal Industry will outline how many reserve sites should be created and their scale, an official told China Daily previously.

Currently, there are no national strategic coal reserves in China and only some enterprises keep a certain quantity of coal in stock.

Huang Shengchu, president of the Beijing-based China Coal Information Institute, said it is the right time to promote coal reserves nationwide, as coal prices are relatively low.

The 21st Century Business Herald said the coal reserve is divided into spot and resource reserves, with most of the unveiled schemes both at national level and regional level, adopting spot reserves.

However, Huang said spot reserves apart from being expensive, are not fit for large-scale storage as steam coal is apt to spontaneous combustion and efflorescence.

He also said a certain amount of spot reserves of coal will help to stabilize market prices and relieve the conflicts between coal suppliers and power generators at a particular time.

(China Daily February 7, 2009)