The coal industry is expected to fall short of demand in 2005, with some areas possibly being hit by striking shortfalls despite robust growth in production.

The prediction was made at the ongoing weeklong Coal Ordering Conference in Qinhuangdao, in  Hebei Province, which started last Thursday.

The conference attributed the expected shortfalls to soaring demand, inadequate production capacity and transportation.

The largest will be concentrated in the east and south of the country, said Han Yong, a coal industry analyst with Shanghai-based China Securities.

In eastern China only a small number of areas, including Anhui and Shandong provinces, produce coal, Han said, while regions like Shanghai, as well as Jiangsu and Zhejiang provinces yield little, but are amongst the largest consumers nationwide.

2.05 billion tons is expected to be produced this year, enough to meet basic needs. Yet inadequate transportation will bottleneck the country's market balance, said an industry insider from China Coal and Coke Holding Ltd.

In an effort to relieve the situation, the government is planning to further expand transportation routes from coal-rich regions, including Shanxi and Shaanxi provinces and the western area of Inner Mongolia Autonomous Region, and improve transportation facilities at ports such as Qinhuangdao, according to official sources.

Han told China Daily the country is expected to improve transportation capacity of the railway between Datong in Shanxi and Qinhuangdao in Hebei from 2004's 150 million tons to 200 million tons this year.

In order to increase production, the National Development and Reform Commission (NDRC) aims to further improve performance by shutting down coal mines that do not meet basic production conditions, and by regulating new mines and power plant construction.

The country is expected to speed up work on existing large coal mines and fortify producers' technical strengths this year, said Han Yong.

"Large coal mines boast 70 to 80 percent efficiency in coal production, compared with the small producers' roughly 20 percent," said Han, so the elimination of small mine construction projects would not have a major impact on the country's coal supply.

The NDRC is also attempting to streamline supply and demand information sharing. The coal industry association, power generation units, and transportation sections will be required to provide detailed production information.

Han said the government is attempting, with this move, to promote market regulation, further signaling the establishment of a nationwide coal exchange center to replace the annual coal ordering conference.

Five areas - power generation, fertilizer production, steel production, individual consumers and exports - will be given priority, said an official statement, in order to guarantee stable economic development.

The weeklong conference, also stressed the importance of restricting disordered construction in high energy consuming industries, including steel, cement, and power generation, in reducing irrational demand.

Last year, the central government took steps to rein in construction in sectors including steel and power generation, and the endeavor is expected to continue this year, experts say, with an aim to ensure an optimized economic structure and a balanced energy supply and demand.

(China Daily January 4, 2005)