Coal firms told to honor contracts

Updated: 2008-01-24 08:50

The central government has ordered coal firms to stop driving up prices and said they must honor their supply contracts with power plants in an effort to head off a power shortage.

At the request of the National Development and Reform Commission, the China Coal Transportation and Distribution Association has threatened to cancel the license of any company that ignores the order to stabilize prices.

"Coal producers must strictly implement their contract prices for 2008 and must not take advantage of the current tight supply to raise prices as they like," the association said in a circular issued yesterday.

Prices should be held at around the same level as at the end of last year, the circular said.

The government is also banning all coal shipments other than those to power plants.

The crackdown comes as the country faces a severe power shortage. Several power plants are struggling to secure the coal they need, while others are reducing their output rather than lose money as coal prices soar.

Brownouts have already hit at least 13 provinces, and at its peak last week, nationwide demand outstripped supply by nearly 70 gigawatts, the People's Daily newspaper reported yesterday.

About 80 percent of China's electricity is generated by burning coal.

The crackdown on unsafe mines, high global demand, which pushed up prices and the cold snap that has closed roads and downed cables have added to the problem, an official from the State regulator said.

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