By DAVID WINNING
March 8, 2007
BEIJING -- China's emergence as a net coal importer is shaking up the Asian market, potentially lighting a fire under regional coal prices and intensifying competition with consumers like Japan over long-term supply contracts.
It is also adding to China's worries about its energy security, prompting it to step up efforts to woo coal-rich neighbors such as Mongolia and Vietnam that have so far been suspicious of Beijing's efforts to access their reserves.
As recently as 2003, China was the world's second-ranked coal exporter. A major increase in demand has changed the picture.
In January, China's imports of coal shot up to 4.7 million metric tons, 81% higher than a year earlier, and far outweighing exports, which fell by one-fifth to 3.29 million tons. China's coal exports have been declining for the past two years, dropping 12% in 2006 and 17% in 2005, though for 2006 they were still larger than imports.
Ma Kai, the head of the planning body that oversees energy policy, said yesterday that China's increasing energy needs wouldn't harm global-energy security, as the country still satisfies 90% of demand domestically.
"Looking to the future, China is completely able to rely on its own efforts to solve the problem of energy demand," Mr. Ma told a news conference, pointing to domestic reserves of coal, oil and natural gas, as well as the potential for developing hydropower and other sources.
Coal accounts for 70% of China's energy needs and while experts say there isn't a danger of its reserves running out for decades at least, the country's rapid growth in domestic production is pushing the mining industry close to its limits.
In 2000, China produced around one billion tons of coal domestically. Production rose to 2.33 billion tons last year. The National Development and Reform Commission, the agency that Mr. Ma heads, is forecasting production of 2.6 billion tons by 2010, but analysts say this volume won't cover domestic demand at that time.
"With such an increase in output since 2003, we can make the case that the China coal system is operating near its peak short-term supply capability," said Ghee Peh, head of Asian mining research at UBS, calling the situation "unprecedented in the history of coal mining."
China isn't short of reserves overall, with the BP Statistical Review of World Energy 2006 -- the most recent available -- stating that the country's coal reserves totaled 114.5 billion tons by the end of 2005.
Chinese coal mining is constrained by the shortage of water in many coal-rich regions, and is also facing a shortage of engineers. Analysts said the industry has seen an exodus of skilled labor to real estate and other technology-based industries in recent years in search of better pay.
--Andrew Batson contributed to this article.