SteelOrbis Shanghai
China's State Administration of Work Safety has issued figures showing that the country's crude coal output last year rose 8.1 percent year on year to 2.325 billion mt, sharply up 1.326 billion mt or 133 percent compared with the 999 million mt recorded in year 2000. According to the coal industry's Eleventh Five-Year Plan, released by the National Reform and Development Commission in late January, the total output of
China's coal industry is to be kept under control below 2.6 billion mt in 2010.
Many market insiders think that coal
production this year will maintain its rising trend, influenced by the rapid and steady growth of
China's economy. However, several unfavorable factors may succeed in restricting
production capacity.
These factors can be listed as follows:
1. National coal
production will be greatly affected by the strict measures implemented by the government to shut down medium and small coal mines:
In order to eliminate out-of-date
production capacity and ensure work safety,
China plans to shut down 4,861 small coal mines in 2006 and 2007. According to the relevant documents issued by the State Council's Work Safety Committee,
China plans to close down 2,652 small mines in 2006 and 2209 mines in 2007. The closedown of medium and small coal mines will further curb the growth of coal
production, reducing the overall supply.
2.
Production costs will be raised for coal enterprises:
In November 2006,
China's Ministry of Finance, Ministry of Land and Resources, and National Reform and Development Commission jointly announced their Plans on Strengthening Policy Reform for the Use of Coal Resources by Payment, specifying that unless otherwise stated, the exploration and exploitation rights of new coal resources should be assigned through bidding, auction, flotation, and other kinds of competitive market mechanisms. In addition, the government will also hike its coal resources tax, thus increasing coal exploitation costs.
3.
China's adjustment of import and export tariffs contributes to curbed exports and increased imports:
On October 27, 2006,
China adjusted its provisional import and export tariffs for some products. Among the measures involved, the export rebate for coal products was cancelled, while a new export tariff was levied on some coal products. At the same time, the import tariff was reduced for coal.
4. The decline in the crude oil price is also having a certain impact on coal
consumption:
In 2006, the crude oil prices saw a continuous increase in the international market, peaking as high as $80 or so. However, the price commenced a downward movement during the second half of the year. At present, the price is fluctuating at $50. This low price level is attractive to some users, leading to a negative influence on coal
consumption.
All in all,
China's coal
production may be restricted by many factors in 2007. With the price still remaining at a relatively high level, total output seems bound to be affected somehow.