Beijing to rein in rising coal output
Annual growth target of 3.4pc seen as aggressive given runaway demand
The central government has set a target to cut the average annual output growth of China's coal industry to 3.4 per cent between 2006 and 2010 from 8 per cent last year, a move analysts described as aggressive because of strong demand and the difficulty of replacing coal with alternatives in the short term.
In an industry development blueprint for 2006-10 released yesterday, economic policy setter, the National Development and Reform Commission (NDRC) said it planned for the industry to have 2.6 billion tonnes of output in 2010, up 18.2 per cent from 2.2 billion tonnes in 2005.
This compares with last year's production growth of 8 per cent to 2.32 billion tonnes, according to preliminary data released last week by the State Administration of Coal Mine Safety.
Given coal is the most significant fuel in China's primary energy production, its tight supply and high costs of oil and gas, analysts said it would take a long time before the construction of non-coal-fired power plants could ease consumption growth in coal.
'As coal already has an about 80 per cent share in power production and because new non-coal projects will take a while to come on stream, the government's efforts will require significant time to deliver a measurable impact,' said BNP Paribas analyst Bradley Way.
In a recent research report, CLSA projected China's coal output to reach 2.64 billion tonnes in 2007, three years earlier than NDRC's plan.
The brokerage projected it to grow a further 9.4 per cent next year to 2.88 billion tonnes.
'The Chinese government has always underestimated coal demand in the past few years,' said another analyst at an Asian brokerage.
Continued high growth in the mainland's power consumption and new capacity commissioning in the past few years have made it difficult to dampen the nation's appetite for coal in the next few years.
Output of the power industry, which consumes about half the annual coal output, grew 14 per cent last year to 2.82 trillion kilowatt-hours, while coal-fired generation capacity grew 23.7 per cent, according to the China Electricity Council.
However, demand will be partly eased by the fact that most of the new power plants are built with advanced technology which makes coal consumption more efficient.
The NDRC projected the nation's coal production capacity to grow 430 million tonnes between last year and 2010.
It plans to add 610 million tonnes of capacity from the expansion of medium and large-sized mines, as well as 200 million tonnes from the consolidation and upgrading of small mines into large ones.
This will be partly offset by a plan to close 380 million tonnes of annual capacity from small mines, as part of an effort to reduce fatalities in the nation's notoriously unsafe coal industry.
