Mon, Dec 22, 2003 - Page 10 News List

China plans major restructuring of its energy industries

AFP , BEIJING

China is planning to reorganize its coal industry and form eight to 10 large coal mining firms capable of mass output to address the country's serious energy shortage, state media said yesterday.

The plan was announced over the weekend as officials revealed China's coal output -- while expected to increase by 14 percent from last year to 1.6 billion tonnes this year -- cannot meet rising demand due to rapid economic growth.

Under the plan unveiled Saturday the companies will be capable of each producing more than 50 million tonnes of coal annually, the Xinhua news agency reported.

Four or five of the firms will be expected to each turn out 100 million tonnes a year, according to the plan revealed by the Chinese Society of the Coal Industry, formerly the Ministry of the Coal Industry, at a conference on coal sector reform.

The firms will be created through mergers and are expected to control 60 percent of the domestic coal market, Xinhua said.

The Society is also planning to build large coal mining centers and big and medium-sized mines equipped with advanced equipment.

Lack of large coal firms made it hard to relieve serious coal shortages earlier this year, the government found.

Only four companies in China are capable of producing 30 million tonnes of coal or more annually, accounting for only 14 percent of the domestic market demand.

Major coal producers in the US, on the other hand, can control up to 40 percent of the American coal market.

China -- the world's largest producer and consumer of coal -- boasts 28,000 mines, but these are relatively small and ill-equipped, with a production capacity of approximately 50,000 tonnes each.

Coal remains in short supply.

Power plants, for example, are expected to consume 826 million tonnes of coal this year, a rise of more than 13 percent from last year, according to Xinhua.

The situation is so serious that seven major power producers, including China Huaneng Enterprise Group, recently sent a petition to the government asking it to intervene.

Coal shortages forced generators to be shut down, disrupting electricity production at the plants, Xinhua said.

The problem is attributed to rapidly rising demand, shipment costs and coal prices, but experts cited the remarkable growth of the Chinese economy as the main factor, Xinhua said.

This year, China's economic growth rate is expected to hit 8.5 percent, increasing faster than any other major economy in the world.

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

Despite the fact that China is modernizing rapidly, at least 70 percent of its energy needs is still met with coal.

That ratio will remain unchanged for a long period to come, Xinhua quoted industry sources saying.

However, Shenhua Group, the country's leading coal producer, is expecting to turn out a record 100 million tonnes of coal this year.

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