Coal is among the major energy sources in China. In 2007, coal accounted for 76% of China's energy output and 69% of consumption. Being rich in coal, poor in oil and natural gas, China can do nothing but focus its attention to coal production and consumption for well into the future.

China is now the largest coal producer, as well as the largest coal consumer, in the world. The output of raw coal for China in 2007 was 2.52bn tons, 197 million tons more than the output in 2006. And in the first half of 2008, similar output was 1.24bn tons, up by 124 million tons or 11.1% year-on-year. Data shows that there are now 1,563 coal mines under construction, with the total annual production capacity of 653 million. In addition to the rebuilt and expanded mines and resource integration, the total new annual production capacity is 830 million tons. As well, it is expected that the annual production capacity of coal mines in China would reach 3.33bn tons by 2010.


Figure 1: Supply & Demand of Coal in China 2005-2010

As for consumption, the major consumers in China have been the following four industries, power, metallurgy, chemical, and building materials industries, which have accounted for about 90% of China's total demand for coal.

Figure 2: Structure of Coal Consumption in China 2007

As for import and export, China's coal industry has undergone two stages in the last decade: 1998 through 2002, import of coal increased slowly and export quickly, while 2003 through 2007, the relationship was reversed, with import increasing and export slowing, the result of the strong demand for coal; indicative that the supply has fallen relatively short in China in recent years, while a balance is expected between coal import and export in China 2008 through 2010. So generally speaking, China doesn't rely so much on foreign coal resources.

As for coal prices, the price of coal in China will likely continue rising well into the future, due to:  (1) Regional coal shortages. Although there is an overall balance between coal supply and demand in China, short supplies and types of coal are present in some regions. (2) Change in pricing structure. Beijing is reforming its policies on prices of resources, and the price change of power supply and oil products would force up the cost for coal mining and transportation. (3) Implementing newer technologies. Beijing is raising the standards of running coal mines to promote the application of high technologies and high-tech equipment, thus the cost for mining safety would increase.