Fatal results of fuel fury in China
By Mai Tian (China Business Weekly)
Updated: 2004-12-12 10:48

China's coal mines are cashing in on the strong market demand, triggering frequent fatal mine blasts across the country and prompting the government to tighten workplace safety inspections one after another.

But mines will remain dangerous because robust demand encourages mines to continue increasing production beyond their capacity, experts told China Business Weekly last week.

When a coal mine accident takes place, all the mines in nearby areas are requested to stop their operations for inspections.

"Stopping production cuts down the coal supply in the market, and eventually, stimulates others to produce more to cash in on the strong demand,?said Huang Teng, an analyst with Beijing Changmao Consultant Co Ltd.

"It is like a chain reaction.?

Although the coal prices have been increasing this year due to swelling demand driven by brisk economic growth and heating in winter, as much as 55 per cent of the increase was transferred to circulation areas.

"The low prices have caused losses to coal industries for decades,?said Pu Hongjiu, vice-president of the China National Coal Association. "Mining companies have to cut down the investment in safety improvement and maintenance of pits, and the salaries of workers.?

In all, the mines are short of 50 billion yuan (US$6 billion) in safety investment, according to Pu.

More than 300 miners have died in two major coal mine explosions in the past two months.

A gas blast at a coal mine in Guizhou Province killed at least 16 people last Thursday, just three days after an explosion in Shaanxi Province, claiming 166 lives.

The two blasts followed another deadly explosion that killed 147 in Henan Province in late October.

Apart from the old story of poor safety conditions, experts said the over-production is also partly to blame for these accidents.

Coal mines are producing beyond their capacity in order to cash in on market growth. Strong economic growth, especially the hefty electricity generation demand, has continuously pushed up coal consumption, increasing coal prices.

Over-capacity production is becoming more serious during the winter when more coal is needed for heating.

Chenjiashan, where the Shaanxi accident occurred, completed 1.8 million tons full-year production plan in November. But the local mining bureau demanded it produce 2.2 million this year, according to the 21st Century Business Herald.

Official statistics show 20 of the 27 coal producing areas have operated beyond their capacity. Most of the areas have produced 10 per cent over their normal capacity, while some are even producing 50 per cent more.

This overproduction, without the necessary maintenance and rest, worsened working conditions and made the mines increasingly dangerous.

Meanwhile, the price increase in the coal market also led to the reopening of many illegal small coal mines, which have been forced to close down because of their poor safety records and inefficient production.

Some local governments overlooked the reopening of the illegal mines as they contribute tax revenues and meet the immediate coal demand.

In the first 10 months of the year, China, the world's biggest coal producer, turned out 1.6 billion tons of coal, an increase of 19 per cent year-on-year.

But fires, explosions, floods and other accidents killed 4,153 coal miners in the first nine months of this year, although the figure was 13 per cent below the death toll from the same period last year.

In response to the recent coal mine accidents, the government issued new regulations that aim to improve ventilation in mines, and better handle deadly coal gas.

The government also vowed to intensify safety inspections, and crack down on illegal production.

Ironically, the move could even be dangerous.

The average Chinese miner produces 321 tons of coal per year ?just 2.2 per cent of a US miner's output.

But the fatality rate ?measured per 1 million tons of coal produced ?was 100 times that of mines in the United States.

About three miners died for every 1 million tons of coal production in China this year.

Pu blamed the high fatality rate on poor equipment, unqualified workers and low spending on protection facilities.

China's coal mines, mired for years in deep losses, lack safety facilities and safety-control management.

Thousands of county-level coal mines do not even have specialized technicians for safety control, and the coal miners have not received necessary training, said Pu.

But Pu also complained that unreasonable low coal prices also played a role in poor safety.

Pu said coal mines have been suffering from low prices to supply the power industry, which is one of the most profitable industries in China.

The coal price only accounts for 20 per cent of the electricity price, as compared with 50 per cent in the United States, according to Pu.

Wu Ning, deputy director of the Energy Bureau under the National Development and Reform Commission, said the government is supporting the mines to improve safety.

Since 2001, the government has subsidized nearly 6 billion yuan (US$725.5 million) from treasury bonds to help mines upgrade safety facilities.

The subsidy, combined with 5.4 billion yuan (US$653.0 million) from the companies themselves and banking loans, has helped complete more than 530 projects of safety upgrading. Another 488 projects are underway.

Wu said the government will continue to support the improvement.

Wu said the government has started to collect 2-10 yuan (24.2 US cents-US$1.2) a ton specialized fund to upgrade the safety facilities.

About 6 billion yuan (US$725.5 million) is expected to be collected this year.

Coal supplies two-thirds of China's energy needs.

Officials say China will rely on coal for at least half of its energy for the next 30 to 50 years.

** Major accidents in October and November

October 10: 14 died in a carbon monoxide poisoning accident in a coal mine in Central China's Hunan Province.

October 12: Four died when a mine collapsed in Changchun, in Northeast China's Jilin Province.

October 20: 147 died in a gas explosion in Daping coal mine in Central China's Henan Province.

October 22: 15 were killed in a gas blast in a coal mine in Southwest China's Guizhou Province.

November 6: Four died in a gas explosion in a coal mine in Northeast China's Jilin Province.

November 11: 33 were killed in a gas blast in a coal mine in Lushan County, in Central China's Henan Province.

November 13: At least six died and 13 went missing in a gas explosion in Pengzhou, in Southwest China's Sichuan Province.

November 28: 166 died in a gas explosion in a coal mine in Tongchuan, in Northwest China's Shaanxi Province.

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