By Wan Zhihong (China Daily)
Updated: 2007-10-20 09:46

The first national coal exchange, based in the capital of North China's Shanxi Province, is expected to begin operation in November, industry sources said.

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The China Taiyuan Coal Trading Center will involve a total investment of 1 billion yuan, with a trade center in Taiyuan and a coal base in Qidong, in East China's Jiangsu Province, said a Shanxi Coal Transportation and Sales Co source.

Shanxi Coal, a State-owned coal distribution company, will take a 10 percent stake in the center. China's second largest coal company China Coal will hold 4 percent of the exchange, said the source, on condition of anonymity.

Of the nation's five largest power companies, Huaneng, Datang and Guodian will each take 4 percent in the center, and Huadian and China Power Investment will each hold 3 percent, said the source.

The center is an important step toward reform of the nation's coal distribution system, said Huang Shengchu, president of the China Coal Information Institute. It will replace an annual coal ordering conference - a remnant of China's planned economy.

The center is similar to the Zhengzhou Commodity Exchange and will run according to a membership trading system.

It will expand the activities of the coal trading center set up in Taiyuan in 1993 to "provide a reliable and transparent platform for coal producers, consumers and transporters across China", said Huang.

"Prices at the national bourse will be the benchmark in China, which will help to create a unified domestic coal market," he said.

"It will also help raise the standing of Chinese companies on the international coal market."

China's coal sector is fragmented, with more than 20,000 suppliers of the raw material in the nation.

Shanxi is China's biggest coal producer, and coal production in the province grew by 11.2 percent year-on-year to 268 million tons in the first half of 2007, accounting for almost a quarter of the total in China during the period, according to industry data.

China's coal production jumped 11.7 percent to 1.28 billion tons in the first seven months of 2007 from a year earlier, according to the National Development and Reform Commission, the nation's top economic planner.