(Xinhua)
Updated: 2008-01-30 11:52

Rising coal prices, delivery costs

Coal prices had risen nearly 20 percent month-on-month, said the China National Coal Association, in a report released on Monday. Meanwhile, coal delivery costs in coastal regions had surged more than 50 percent in the past six months and were expected to continue rising.

This indicated that coal prices were increasingly affected by market conditions, said an analyst with SINOLINK Securities Co Ltd Last year, the contract prices of thermal coal rose by an average of 10 percent over the previous year.

A senior official of China National Coal Corp, the country's second largest coal producer, said that prices would remain high this year.

Prices for coal shipments between northern Qinghuangdao and Shanghai had risen from 75 yuan per ton ($10) in July to 110 yuan per ton in December.

China Shipping Haisheng Co Ltd said it had raised the contract price by 79 percent in a thermal coal delivery contract signed in January with one customer.

Analysts with Guotai Junan Securities said coal delivery prices would probably rise 40 to 50 percent this year.

It takes time

The Railway Ministry warned on Monday that the closure of some coal mines during the Spring Festival next month, when workers would be on holiday, would further exacerbate power supply problems. The problems have been building since the dry season months ago. Hydropower output declines during dry seasons and coal-fired generation must make up the shortfall, meaning that it's harder to build up coal stockpiles.

Severe droughts affected 1.52 million hectares of cropland in south China in July and August, leaving 242,000 ha. any without harvest at all -- and squeezing electricity output at big dams throughout the southwest.

"It takes time to restore normal inventory levels," said Zhu Hongren, deputy director of the Bureau of Economic Operations with the NDRC.

To ensure fuel supply during the upcoming Lunar New Year and the National People's Congress session, the ministry said that policies would favor coal transport. Coal heading for power plants in economic hubs -- the eastern and central regions -- would be moved first.

In addition, the Ministry of Communications asked shipping companies to halt exports and transfer coal more swiftly to big cities.

Strong domestic demand drove up coal imports by 34 percent to 51.02 million tons last year, while exports totaled 53.17 million tons. Net exports shrank to 2.15 million tons from 82.9 million tons as recently as 2003, according to customs statistics.

The country even became a net importer in the first quarter of 2007. Customs officials attributed this to a decline in domestic supply after the closure of many illegal, dangerous collieries.

Other steps that have affected the coal trade include the scrapping of import tariffs and the end of tax rebates on coal exports, along with the imposition of coal export tariffs.

Coal makes up nearly 70 percent of China's non-renewable energy resources. To fuel robust economic growth, coal production more than doubled from 998 million tons in 2000 to 2.38 billion tons in 2006 and investment in the coal industry has risen at an annual rate of 50 percent in recent years.

China depends heavily on coal, which is considered an affordable energy source at a time when world oil and natural gas prices haven risen steadily.

The country faces a 69.63 million kilowatt electricity supply gap.

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