Pricing regulators said the present rise of coal prices in China is normal and acceptable as the whole industry has just shaken off a three-year loss.

The mild price rise follows a changing balance of demand and production capacity of coal - the most widely used fuel in the country.

"Coal prices are on the rise in some parts of the country, and they are returning to a fair level," said Zhang Guobao, vice-minister of the State Development Planning Commission (SDPC) which is charged with authority over pricing.

Statistics revealed that for the previous 11 months of 2001, the coal price secured an average year-on-year growth of 6 percent. And the price in October was 10 percent higher than in January.

"The rise, from 140 yuan (US$16.9) in 2000 to the present 150 yuan (US$18) per ton, does not mean the market is short of coal; on the contrary, the supply is stable," Zhang told China Daily.

The country had 100 million tons of coal in stock by the end of October. Storage is nearly one-tenth of the industry's production capacity in 2001, ranking it first in the world.

China also has the largest coal reserves in the world.

Zhang attributed the rise to a substantial decrease in coal production this year, while coal exports have been robust and domestic coal demand is expanding.

Coal production in China is likely to reach 1 billion tons for 2001 - A drop of 300 million tons below the level of 1997, when the coal price soared to 166 yuan (US$20) per ton.

"The decrease in production is mainly the result of massive closures of small mines with flawed safety measures," Zhang said.

Coal became pressingly important in terms of global energy consumption in 1997 when the international price of petroleum peaked. Most of the State-owned big coal companies moved from the red into the black that year.

Meanwhile, small coalmines mushroomed in number. The trend, coupled with a decline in global coal demand due to the aftermath of the Asian financial crisis, sent the big companies spiraling back into loss again in 1998.

It is predicted the coal price would be stable in the coming year.

(China Daily January 3, 2002)