Chinese government unveils plans to form big coal firms

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Last updated at: (Beijing Time) Sunday, December 21, 2003

Chinese government unveils plans to form big coal firms

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The Chinese government unveiled plans Saturday to form eight to 10 large coal mining firms capable of each producing more than 50 million tons of coal annually to ensure supplies meet China's rising demand.

The Chinese Society of the Coal Industry, formerly the Ministry of the Coal Industry, announced at the ongoing national reform and development conference for the coal sector that four or five of the planned firms will be expected to turn out 100 million tons each on a yearly basis.

Those large merged firms are expected to control 60 percent of the domestic coal market.

The plan was formed after the government found that a lack of large coal firms made it hard to relieve serious coal shortages earlier this year.

Only four companies are capable of producing 30 million tons or more annually, accounting for only 14 percent of the domestic market demand, while major coal producers in the United States can control up to 40 percent of the American coal market.

Shenhua Group, the country's biggest coal producer with a coal output this year, is expected to surpass a record 100 million tons, making it the sixth biggest coal producer in the world.

Officials with the society noted that the insufficient number of major State-owned coal mining enterprises in China affected the central government's recent intervention in coal supplies as the country's power sector suffered coal shortages for thermal-power generation.

China boasts 28,000 mines with a production capacity of approximately 50,000 tons each, explained the officials.

The society also disclosed plans to build large coal mining centers and big and medium-sized mines equipped with advanced equipment.

China's coal output for this year is estimated at a record 1.6 billion tons, up 14 percent over last year's 1.4 billion tons, industry sources said on Friday.

Nevertheless, coal is in short supply because of rapidly rising demand, shipment costs and coal prices.

China's major coal-fired power plants sent urgent signals that they were urgently needed fuel to generate. Some appealed for state intervention to solve their acute coal shortages, which disrupted electricity production.

A petition filed by China Huadian Group, China Huaneng Enterprise Group and five other major power generating units said that most power plants in central and north China faced shortages.

Coal reserves at the power plants had dropped below the secure levels, and some plants had to shut down generators, it said.

Some people attributed the power shortage to soaring coal prices, rising transportation costs, and declining coal stocks and quality, but experts cited the remarkable growth of the Chinese economy as the fundamental reason for the energy shortage.

In 2003, China's economic growth rate is expected to hit 8.5 percent.

Some argued the reform pace of China's energy system was lagging behind national economic development.

Electricity pricing was still subject to government regulation, while coal prices floated in line with market demands, said an official with the China Huaneng Enterprise Group.

Thousands of small coal mines were closed for safety inspections following a series of fatal explosions across the country, but many have since resumed production.

Coal had accounted for at least 70 percent of China's energy supplies, and the ratio would remain unchanged for a long period to come, said the deputy president.

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