China’s Hunger For Coal Sparks Global Pain & Gain

Font Size

Print

Feedback

Email

Discuss

• Discount UK Shopping

Shanghai, March 26: Got coal? Doan Van Kien, the chief of Vietnam’s Vinacoal has and he’s picking up new clients, as world number-two exporter China turns away business to keep its coal-fired economy humming.

Power producers and steel-makers are so hungry for coal, Asia’s favourite fossil fuel, that Vinacoal is expecting a 54 per cent leap in exports this year.

"We’re getting more calls from buyers, such as the Japanese, who used to take Chinese coal," Mr Doan said.

"China’s energy shortage may be bad for the country, but it is very good for us."

Miners around the world, such as Yanzhou Coal Mining Co, Swiss-based Xstrata Plc and Australia’s BHP Billiton, will profit, analysts say.

Coal prices have more than doubled to record highs in the past year, ravaging the profits of power producers and steel-makers such as Korea Electric Power Corp (KEPCO) and Baoshan Iron and Steel Corp, and putting upward pressure on global inflation. Analysts say the price of coal used for electricity generation, which hit a record $55.40 a tonne last week, is set to jump at least 10 per cent this year, as China shaves 13 per cent off exports to 70 million tonne. Australia, the world’s largest coal exporter, shipped 208 million tonne in 2003.

"With the position we now have in the world, a cut in exports would have untold impact on global markets," said Li Tinghe, chairman of the Shanxi Coal Import & Export Group, which operates resources in one of China’s largest coal-producing regions.

Beijing’s efforts to overhaul its splintered and dangerous coal industry — where more than a dozen coalminers die every day — could further squeeze world supply.

"Even the reduction of one or two million tonne from China can be critical in shifting the market’s balance from oversupply to a shortage," agreed coal analyst Greg Dean-Jones at the Sydney-based AME Mineral Economics.

Coal fires three-quarters of China’s power plants. The mainland could burn 1.785 billion tonne of coal in 2004, and become a net importer of coal used for steel production for the first time this year.

The China Coal Association estimates the country will be short of coal over the next two decades, with shortfalls hitting 700 million tonne by 2020.