China's coal price was expected to rise this year to narrow the gap between an artificially low price charged to domestic power stations and higher export prices, an industry official said Wednesday.

The prices that mining companies set for domestic power plants were less than 60 percent of those available to coal exporters, the industry official said.

The free-on-board price at Qinghuangdao port is about US$57 a metric ton compared with about 274 yuan (US$33.09) a ton charged to domestic power stations, the official said on condition of anonymity.

During a State Council meeting last week, Premier Wen Jiabao called for the introduction of market mechanisms to determine coal and electricity prices.

Wen's remarks were perceived by the industry as a harbinger of the possible removal of government controls on thermal coal prices.

Coal prices have risen significantly this year, partly contributing to an increase in local electricity tariffs. Most of that rise in coal prices has been due to higher transportation costs as China's transport infrastructure struggles to keep up with demand for coal deliveries.

China's regulators this year approved an increase in electricity tariffs, although the higher rates don't totally reflect the rise in coal prices on power generators' costs.

Shortages of coal as well as a shortfall in power generating capacity has led to widespread electricity outages across China.

(Shenzhen Daily August 19, 2004)