A recent research report on China's coal industry by Shanghai Shenyin & Wanguo Research Institute Co., Ltd. predicted that coal prices will reach a record high this year and that supply will be strained due to the exhaustion of resources in the east and south and insufficient transportation capacity in the west and north.

Mou Qizheng, in charge of the report, said surging international oil and gas prices had overridden air pollution concerns about coal. Although growth of high energy-consuming industries may slow as a result of macro control measures, coal prices are expected to maintain a high level with small fluctuations from 2006 to 2010.

Mou said the price of coal for power generation would rise by 12 to 17 percent in 2005, higher than the previously expected five to eight percent. The prices of coking coal, bituminous coal and anthracite would also remain high throughout the year.

He said the predictions were made assuming the government's macroeconomic control measures attained their goals and that the economy ran in a stable fashion the whole year.

Li Ruifeng, a division chief at the China Development Research Center of Coal Industry, also said tight supply of coal would not be alleviated before 2007 at the earliest.

The center predicted that coal demand would reach 2.1 billion tons in 2005 and exceed 2.5 billion tons in 2010, with supply still stretched for the following five or six years.

Even if supplies are 127.7 percent of generator demand, meaning 3.22 million tons' oversupply, stored coal in power stations would only be able enough to maintain eight days' power generation, according to Zhongneng Power Industry Fuel Company.

The rapid development of some industries, especially high-energy consuming ones, has caused abnormal growth in energy demand and long-term stable supplies have been threatened due to lack of a guaranteed safe coal supply, according to the company.

With more energy saving policies coming into effect, large and medium-sized state-owned enterprises will enter a period of integration and consolidation, increasing industry concentration from 53 percent to 78 percent.

Profit brought about by integration will exceed price rises, but the integration period will last some three to five years, according to Mou.

(Oriental Morning Post, translated by Yuan Fang for China.org.cn, May 4, 2005)