China May Be Net Importer of Coal for Second Year

(Bloomberg) -- China, the world’s biggest consumer and producer of coal, may be a net importer of the resource for a second year as the government shuts unsafe mines while the economy surges.

Inbound shipments in 2010 may be similar to last year’s levels, Fang Junshi, director general of the coal department at the National Energy Administration, told reporters at a conference in Beijing today. Net imports reached 103.4 million metric tons last year, customs data show.

Imports surged after a nationwide crackdown on mine safety closed about 1,000 small pits last year while the economy grew at the fastest pace in the fourth quarter since 2007. Net coal imports may reach 100 million tons this year, the official Xinhua News Agency reported last month, citing Huang Li, a deputy director at the energy administration.

Output may exceed 3 billion metric tons in 2010, according to Fang, in line with official estimates. China may produce 3.15 billion tons this year, the National development and Reform Commission, the top economic planner, said last month.

Coal consumption may rise to 3.4 billion tons this year, Wei Jianguo, the general manager of State Grid Energy Development Co., a unit of the larger of two grid operators in the country, said at the conference.

In the long term, China must control coal production growth and increase the use of alternative fuels to generate electricity, Fang said. Coal is used as a fuel to produce about 80 percent of the country’s electricity and to make steel.

Pollution Worsens

Pollution surged as the economy more than tripled in the past decade, spurring concerns a deteriorating environment may lead to social unrest. Premier Wen Jiabao in January called China’s pollution situation “grim.”

“China isn’t going to switch to alternative energy overnight, not with 3 billion tons of annual production and consumption,” Paul Manley, managing consultant at Wood Mackenzie Consultants Ltd., said in Beijing.

China closed 1,088 small coal mines last year because they were unsafe and phased out 50 million tons of outdated capacity, Xinhua reported in January. About seven people in China died each day from coal-mine accidents in 2009 compared with 18 fatalities for the entire year in the U.S.

The holder of the world’s worst mine-safety record plans to shut more than 5,000 small pits, or at least 200 million tons of capacity, by 2010, Li Yizhong, head of China’s work safety bureau, said in 2008.

China’s thermal coal imports may fall from last year’s levels because of rising international prices, said Manley at Wood Mackenzie. Total imports may be little changed because of higher demand for metallurgical coal, he said.

Supplies After Drought

China will ensure adequate coal supply to the country’s drought-hit south, Fang said. Demand for coal in the southern regions rose as hydropower production slowed, he said.

The southwestern region including Yunnan, Guangxi and Guizhou provinces has been suffering from a severe drought for almost half a year, with water levels in major rivers at record lows, the Ministry of Water Resources said last month.

The Chinese economy grew 10.7 percent in the fourth quarter and is forecast by the United Nations to advance about four times more quickly than the U.S. this year.

--Wang Ying and Chua Baizhen in Beijing. Editors: Ang Bee Lin, John Viljoen.