China Sees Balanced Demand of Coal
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China’s government said coal supply and demand will reach a “balance” in the second half of this year as mining companies expand output faster than power producers and steelmakers increase their requirements. Demand growth in the second-half of this year will rise at a slower pace, the National Development and Reform Commission, China’s top economic planner, said in a statement on its Web site Monday. Supply will be less tight than in the six months ended June, the Beijing-based commission said. China’s energy use will rise by about 4 percent annually to the equivalent of 2.7 billion tons of standard coal by 2010, the government said in April. The country turned a net importer of coal in January for the first time as economic growth increased demand. About 78 percent of its electricity comes from coal. “A lot of coal production capacity will come on stream this year and next,” the commission said in the statement. “Capacity gains will outpace demand increases.”
Coal producers increased output by 10 percent in the first half to 1.26 billion metric tons, while demand gained 12 percent to 1.263 billion tons, the commission said. Railroads carried 10 percent more coal, transporting 599 million tons. China’s status as a net importer of coal in the first half was the result of “government policies to discourage exports and encourage imports, and because of the appreciation of the yuan,” the commission said in the statement.
The government controls electricity prices to limit their impact on inflation. The nation has a system that allows power producers to pass on higher costs when the price of coal rises more than 5 percent over a six-month period. “China’s electricity price mechanism doesn’t fully reflect the relationship of demand and supply and the scarcity of resources,” the commission said. The country needs a more market-oriented system for electricity prices, it said.
Chinese coal prices are expected to rise next year as a result of supply pressures, the Ministry of Land and Resources said in a report published on its website. It did not give an estimated figure for the price of coal in 2008. Citing research by the China Coal Distribution and Marketing Association, the Ministry said that in order to curb overheating in the industry, the approval of new coal mining projects has been severely restricted. The Ministry issued a notice in February suspending all new applications for mining licenses throughout the country. A campaign to close down small and unlicensed mines has also had a significant effect on supplies, the Ministry said.Although the government’s ‘macroeconomic control’ measures are likely to cut coal demand from other industries, the state will introduce measures aimed at increasing the collection of resource taxes, which will also put pressure on the price of coal.
By the end of 2010, there will be a national coal shortage of around 100 mln tons, the report said. A report released earlier this month by Credit Suisse predicted that China would become a net coal importer by 2010, with output increases by state-owned miners unable to keep up with increasing demand. Transportation problems, as well as increased capital expenditure costs, would also keep the domestic price of coal at a relatively high level over the next few years, Credit Suisse said.
China’s government said coal supply and demand will reach a “balance” in the second half of this year as mining companies expand output faster than power producers and steelmakers increase their requirements. Demand growth in the second-half of this year will rise at a slower pace, the National Development and Reform Commission, China’s top economic planner, said in a statement on its Web site Monday. Supply will be less tight than in the six months ended June, the Beijing-based commission said. China’s energy use will rise by about 4 percent annually to the equivalent of 2.7 billion tons of standard coal by 2010, the government said in April. The country turned a net importer of coal in January for the first time as economic growth increased demand. About 78 percent of its electricity comes from coal. “A lot of coal production capacity will come on stream this year and next,” the commission said in the statement. “Capacity gains will outpace demand increases.”
Coal producers increased output by 10 percent in the first half to 1.26 billion metric tons, while demand gained 12 percent to 1.263 billion tons, the commission said. Railroads carried 10 percent more coal, transporting 599 million tons. China’s status as a net importer of coal in the first half was the result of “government policies to discourage exports and encourage imports, and because of the appreciation of the yuan,” the commission said in the statement.
The government controls electricity prices to limit their impact on inflation. The nation has a system that allows power producers to pass on higher costs when the price of coal rises more than 5 percent over a six-month period. “China’s electricity price mechanism doesn’t fully reflect the relationship of demand and supply and the scarcity of resources,” the commission said. The country needs a more market-oriented system for electricity prices, it said.
Chinese coal prices are expected to rise next year as a result of supply pressures, the Ministry of Land and Resources said in a report published on its website. It did not give an estimated figure for the price of coal in 2008. Citing research by the China Coal Distribution and Marketing Association, the Ministry said that in order to curb overheating in the industry, the approval of new coal mining projects has been severely restricted. The Ministry issued a notice in February suspending all new applications for mining licenses throughout the country. A campaign to close down small and unlicensed mines has also had a significant effect on supplies, the Ministry said.Although the government’s ‘macroeconomic control’ measures are likely to cut coal demand from other industries, the state will introduce measures aimed at increasing the collection of resource taxes, which will also put pressure on the price of coal.
By the end of 2010, there will be a national coal shortage of around 100 mln tons, the report said. A report released earlier this month by Credit Suisse predicted that China would become a net coal importer by 2010, with output increases by state-owned miners unable to keep up with increasing demand. Transportation problems, as well as increased capital expenditure costs, would also keep the domestic price of coal at a relatively high level over the next few years, Credit Suisse said.
