China's coal industry is expected to fall short of demand in 2005, with some areas possibly being hit by striking shortfalls, even though coal production will post robust growth.

The prediction was made at the ongoing week-long China 2005 Coal Ordering Conference in Qinhuangdao, which started last Thursday.

The conference attributed the supply shortcomings to the country's soaring demand for coal, inadequate coal production capacity and transportation.

Major regions lacking coal will be concentrated in east and south China, said Han Yong, a coal industry analyst with Shanghai-based China Securities.

In east China, only a small number of areas, including Anhui and Shandong provinces, produce coal, Han said, while remaining regions like Shanghai, as well as Jiangsu and Zhejiang provinces yield little coal, but are amongst the largest coal consumers nationwide.

China is expected to produce 2.05 billion tons of coal in 2005, meeting basic coal needs, yet inadequate transportation will largely bottleneck the country's market balance, said an industry insider from China Coal and Coke Holding Ltd.

In an effort to relieve the situation, the government is planning to further expand coal transportation routes from the country's coal-rich regions, including Shanxi and Shaanxi provinces and the western area of Inner Mongolia Autonomous Region in northern China, in 2005, and at the same time, improve coal transportation facilities at ports such as Qinhuangdao, according to official sources.

Han told China Daily the country is expected to improve the coal transportation capacity of the railway between Datong, north China's Shanxi Province, and Qinhuangdao Port, north China's Hebei Province from 2004's 150 million tons to 200 million tons this year.

In order to increase China's coal production, the National Development and Reform Commission (NDRC) aims to further improve performance of the coal companies, by shutting down coal mines that do not meet basic production conditions, and by regulating that new coal mine and power plant construction accord with the State's requirements.

The country is expected to speed up work on existing large coal mines and fortify coal producers' technical strengths this year, said Han Yong.

Large coal mines run more efficiently than small ones, said Han, so the elimination of small coal mine construction projects would not have a major impact on the country's coal supply.

Reinforcing supply efficiency

"Large coal mines boast 70 per cent to 80 per cent efficiency in coal production, compared with the small producers' roughly 20 percent," said Han.

The NDRC is also attempting to streamline the coal supply and demand information sharing system, with the purpose of reinforcing the country's coal supply efficiency.

The government orders the coal industry association, power generation units, and transportation sections to provide detailed coal production information.

Han said the government is attempting, with this move, to promote market regulation in the country's coal supply and demand, which further signaled the establishment of a nationwide coal exchange center to replace the annual coal ordering conference.

Five areas will be given priority in coal supply in 2005, including power generation, fertilizer production, steel production, individual consumers and exports, said an official statement, in order to guarantee China's stable economic development.

The week-long coal conference, in addition, stressed the restriction of disordered construction in high energy consuming industries, including steel, cement, and power generation, in order to reduce irrational coal demand.

In 2004, the central government took a series steps to rein in construction in sectors including steel and power generation, and the endeavour is expected to continue this year, experts say, with an aim to ensure an optimized economic structure and a balanced energy supply and demand.

(China Daily January 4, 2005)