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Coal industry set for gradual improvement

By Wang Xinyuan (Global Times)

08:30, March 12, 2013

Many coal producers had a hard year in 2012 as coal prices plunged amid weaker demand and the impact of cheaper imported coal, the Ministry of Land and Resources said Monday.

The domestic coal market is expected to improve, although the impact from cheaper imports will remain, according to analysts.

Due to high levels of stockpiles, some coal producers in Central China's Henan Province took measures to slow production and cut workers' salaries as a result. Due to the lower salaries, many skilled workers left, adding to the difficulties for coal enterprises, the ministry said in a statement on the government's official website.

Domestic coal production hit a record high of 3.86 billion tons in 2012, up 9.64 percent year-on-year. However, as a result of weak demand and rising imports, domestic coal prices fell by about 21 percent by the end of 2012 compared with the beginning of the year, according to the statement.

China was the world's largest coal importer last year. The country imported a total of 290 million tons of coal in 2012, up 59 percent from a year earlier.

"The market demand this year is expected to rise as the economy improves and major coal consuming industries such as power generation and metallurgy recover," said Guan Dali, a coal market analyst with market intelligence firm

China imports coal from countries like Indonesia, Russia, Australia and the US, and the imports are mainly used in China's eastern coastal areas.

Currently, imported coal still has a price advantage of about 30 yuan ($4.4) per ton compared with domestically produced coal, Guan said, noting that imports would still increase this year.

China imported 53.85 million tons of coal in the first two months of this year, up 34.3 percent year-on-year, customs data showed Friday.

As China is the world's largest coal importer, its increasing demand will push up the price in international markets, which is something China should be cautious about, said Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University.

Imported coal accounted for less than 10 percent of China's total coal consumption in 2012, a relatively small share.

However, as the volume of imported coal is getting larger, China should keep alert to its price, as domestically produced coal often uses international prices as a benchmark, Lin told the Global Times Monday, noting that a price hike will bring inflationary pressure.

A recent proposal for containing coal consumption in some major coal consuming regions and areas will bring a change to coal supply, Guan said.

During the ongoing two sessions, members of the National Committee of the Chinese People's Political Consultative Conference proposed zero growth in coal consumption in heavily polluted areas including Beijing, Tianjin, Hebei, Shandong and the Yangtze River Delta.

If the bill is passed, the use of low quality or high-sulfur coal would be reduced in these regions, Guan said.

Coal combustion results in emissions of sulfur dioxide and nitrogen oxides, which are the major cause of air pollution in many regions of China, and concerns are growing over how to deal with the problem.

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