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A tight coal supply in the domestic market combined with government policy incentives has driven China's coal consumers to import more coal from overseas, and industry insiders said the trend would continue at least through to next year.

"It (the increase in coal imports) is a long-term trend," Pan Wanze, deputy managing director of China Coal Import & Export Company, told China Daily at the 2006 China Coal Market Summit that concluded yesterday in Beijing.

China, the world's biggest coal producer, last year bought 18.76 million tons of coal from foreign companies for the first three quarters of this year, an increase of 55 percent year-on-year, while the coal export out of China witnessed a 25.6 percent drop to 54.17 million tons for the same period, Pan said at yesterday's coal summit.

Pan further predicted that China's coal imports for 2005 are expected to reach between 24.2 million tons and 24.5 million tons, and this number will increase slightly next year.

"That is a reflection of the demand and supply outlook, as well as in line with the government's trade policies for the coal sector, which will eventually be a market-based industry through reforms," Wu Chenghou, executive director of the Coal Sale and Transportation Association of China, yesterday told China Daily.

Although the country's coal supply has improved dramatically this year thanks to a production increase, transport network expansions and macro-controls to contain demand, coal consumers in the domestic market will still likely suffer from a supply shortage.

The central government has short-listed a total of 8,648 small coal collieries to be closed by the end of this year for not meeting safety and quality controls, and this move will account for 100 million tons of coal output, some 2.5 percent to 5 percent of the nation's total demand for coal.

"If that happens, the nation's coal output will undoubtedly reduce," said Wu.

The likely production cut, together with China's surging demand in sectors such as power and petrochemicals will continue to keep the supply tight for next year and boost domestic coal prices, which have seen a slight retreat this year, said industry analysts.

The coal consumers in coastal regions in eastern and southern China, such as Guangdong Province, have turned to coal producers in countries including Indonesia, Viet Nam and Mongolia, where prices are lower, especially for thermal coal and anthracite used for making petrochemicals, said China Coal's Pan.

(China Daily November 3, 2005)