More moves likely to ensure coal supplies

China is expected to strengthen efforts to safeguard the balance between coal supply and demand amid its broader pursuit of further enhancing the energy supply and optimizing the energy mix, industry experts and analysts said.

Surging coal prices on international markets and the approaching summer that usually sees a peak in electricity consumption in China have jointly made it more urgent for the nation to increase coal supplies, they said, adding that over the longer term, China is determined to reduce the use of the fossil fuel that currently serves as its major energy pillar.

Data from the National Bureau of Statistics showed the country's raw coal output rose 10.3 percent year-on-year to 1.08 billion metric tons in the first quarter.

Yet persistently high-level coal prices on international markets have squeezed China's coal imports by 24.2 percent from a year ago to 51.81 million tons.

A report by the China Electricity Council showed the price of thermal coal has risen significantly since the start of the year, pressing on the profitability of coal-fired plants.

The nation's coal-fired power enterprises' costs of thermal coal increased by 130 billion yuan ($19.43 billion) during the first quarter from a year earlier, and nearly half of coal-fired power plants affiliated with the large-scale electricity generation companies reported losses over the period, the report said.

Last year, coal accounted for 60 percent of the country's electricity generation with an installed capacity of less than 50 percent, according to the National Energy Administration.

"With huge reserves and complete mining and transportation infrastructure, domestically produced coal will remain a key and reliable energy source under the current conditions for China to safeguard energy security and ensure economic expansion," said Chen Jia, a researcher at the International Monetary Institute of the Renmin University of China.

"From a long-term perspective, the weight of coal in China's energy mix will be reduced gradually due to the development of new energy as China has pledged efforts to protect the environment and pursue greener economic growth," Chen said.

To ensure coal supply, a State Council executive meeting held on April 20 said China will strive to increase coal production capacity by 300 million tons to give full play to coal as the main energy source while promoting the clean and efficient use of coal and strengthening the construction of storage facilities.

A total of 100 billion yuan of reloans for the coal industry will be issued by the People's Bank of China to support coal development and cleaner use, the central bank said on Wednesday.

That additional relending quota, which followed a targeted reloans program of 200 billion yuan announced last November to make coal use cleaner and more efficient, will be used specifically for coal development and the enhancement of coal storage capacity, with priority given to ensuring safe production and storage, to increase the electricity coal supply for coal-fired power companies.

At the same time, seven types of imported coal products including coking coal and brown coal will enjoy zero tariffs over the next 11 months, starting from May 1, according to the Customs Tariff Commission of the State Council.

"The surges in international energy prices due to global inflation and geopolitical issues have added more uncertainties to the fragile balance between coal supply and demand in China," said Wu Wei, an assistant professor with the School of Management at Xiamen University, Fujian province.

"As electricity use in China usually peaks during the June-August period, and such seasonal power consumption increase is usually met by added coal-fired power output, coal prices are expected to stand at high levels during the second and third quarters this year," Wu said.

Wu suggested China increase coal output by further unleashing the potential of safe and clean capacity and guide investments into advanced capacities to ensure coal supply.

At the same time, the nation is expected to accelerate the development of renewable energy to reduce reliance on coal, he added.

Chen, with the Renmin University of China, expected the nation to give more support to coal mines with new policy measures and financial aid, effectively guide energy consumption to avoid price fluctuations caused by demand volatility and accelerate the establishment of a unified domestic market to ensure logistics and transportation for coal run as smoothly as possible.

He also said it is important to track global coal market movements, strengthen coal storage capacity and enhance foreign trade policies to reduce the costs of importing coal.