Insights into the New Developments in China’s Energy Sector from the National Energy Work Conference
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The National Energy Work Conference concluded in Beijing on the 5th; it was the first national energy work conference held in our country in 17 years. Amidst the severe fluctuations in the global energy landscape and the new challenges and situations facing China’s energy development, this conference has attracted considerable attention. Problems coexist with hopes, and opportunities alongside challenges. At present, the impact of the international financial crisis is growing increasingly severe. How to address energy security issues in a better and more effective manner, and to advance energy development to a higher level, has become an urgent and important task for our country. Forging an energy chain with sustainable guarantees: Energy is the foundation for economic and social development, as well as a crucial element for modernization efforts. The energy situation in 2008 experienced rollercoaster-like \"wild fluctuations\". In the first half of the year, the frequent occurrences of oil and electricity shortages, along with the continuous sharp rise in coal and oil prices, were quite striking. The temporary shortage of coal, electricity, oil, gas, and transportation has once again highlighted the \"bottleneck\" of energy supply in economic operations. However, the rapid changes in the energy landscape were unexpected. Starting from the third quarter of 2008, shortages of oil and electricity seemingly turned into relative surpluses overnight; coal and oil prices declined steadily, energy consumption demand fell, the profitability of energy companies decreased, and the pace of investment in the energy sector slowed down. “Changes in the economic situation have had some adverse effects on China’s energy development. ”**Zhang Guobao, deputy director of the National Development and Reform Commission and head of the **Energy Bureau, said. In 2008, the annual growth rates of national coal consumption, total electricity consumption across the economy, and apparent crude oil consumption all declined by 1.6 percentage points, 9.57 percentage points, and 2 percentage points respectively on a year-on-year basis. Meanwhile, the growth rates of investment in coal, oil, and natural gas throughout the year were 8 percentage points and 17.4 percentage points lower respectively compared to the first three quarters, and the amount invested in infrastructure for power generation projects also decreased by 10.78% on a year-on-year basis. In recent years, energy supply has consistently been a prominent issue restricting economic development in our country. At present, China’s dependence on imported oil has exceeded 50%; there is a shortage of high-quality energy resources domestically, with low per capita availability. Energy shortages and resource constraints represent a long-term issue. “Although the current growth in energy demand is slowing down, this does not mean that energy project construction should be halted. ”Zhang Guobao pointed out that, from the perspective of the comprehensive construction of a moderately prosperous society, there is still significant room for growth in China’s energy demand, and energy development remains in a historically rapid growth phase. Among total investment in society, energy investment accounts for a significant proportion, around 10%. Although investment by energy companies has declined, starting from the fourth quarter of 2008, as an important part of measures to boost domestic demand, our country **increased its investment in energy, focusing on the development of major energy infrastructure and key energy projects. By the end of 2008, construction had already begun on three nuclear power plants in Fuqing, Fujian; Fangjiashan, Zhejiang; and Yangjiang, Guangdong, as well as on the Ningdong coal, electricity, and chemical complex. In 2009, China accelerated the construction of 13 large-scale coal-fired power bases with production capacities of 100 million tons each. Construction began on nuclear power plants such as those in Sanmen, Zhejiang, Haiyang, Shandong, and Taishan, Guangdong, as well as on the eastern section of the West-East Gas Pipeline Project... Experts point out that by taking advantage of the current pro-expansion policy environment to advance energy investments that are crucial for overall national interests and strategic security, it is possible to effectively stimulate domestic demand while also establishing a robust framework for ensuring long-term energy supply and enhancing the overall resilience of the energy sector against risks. Make the energy structure lighter and cleaner. In recent years, China’s power generation capacity has been increasing at a rate of almost 100 million kilowatts per year. By the end of 2008, the total installed electricity capacity reached 792 million kilowatts, ranking second only to the United States in the world. However, as electricity has developed at a rapid pace, problems have also continued to accumulate. Within this power structure, the share of thermal power continues to rise rather than decline; thermal power accounts for around 80% of both installed capacity and electricity generation, while high-quality energy sources such as oil, natural gas, and nuclear power account for only about 20%. At present, coal accounts for about 70% of China’s primary energy consumption, which is 40 percentage points higher than the world average. China has the highest coal consumption in the world, and the extensive extraction and use of coal are causing increasingly serious environmental and transportation problems. An energy structure that relies too heavily on coal poses many problems for the secure supply of energy. “The relatively easing energy supply and demand situation provides a rare strategic opportunity for structural adjustment. ”Zhang Guobao pointed out that in 2009, structural adjustment should be taken as the main focus of energy work. The restructuring of the power industry was ranked first among China’s energy-related tasks in 2009. According to the plan, in the new year, while advancing the construction of large-scale coal-fired power plants and promoting the consolidation of the power industry by phasing out smaller plants, \"vigorously developing nuclear power\" will be regarded as an important task. At present, nuclear power capacity accounts for only 1.1% of China’s total electricity generation capacity, and just 0.77% of its primary energy consumption. This figure not only shows a large gap compared to some developed countries in the world, but it is also far below the world average. “Our country has great potential for developing nuclear power. At present, both the talent pool, as well as the technical level and equipment manufacturing capabilities, meet the conditions for accelerating the development of nuclear power. ”Zhang Guobao said. It is understood that this year, China will commence construction on several nuclear power projects, with a newly approved capacity of 8.4 million kilowatts. Actively developing renewable and new energy sources such as hydropower, wind power, solar energy, and biomass energy, and continuously increasing the share of clean energy in China’s primary energy consumption, represents another breakthrough for optimizing the country’s energy structure. The recent National Energy Work Conference specifically called for promoting the large-scale development of wind power. According to the plan, **efforts will be made to establish several wind power bases with capacities of tens of millions of kilowatts in Gansu, Inner Mongolia, Hebei, Jiangsu and other regions over a period of more than 10 years. It is understood that in order to meet the needs of the rapid development of clean energy sources such as nuclear power and wind power, **research into adjusting the medium- and long-term development plans for nuclear power, as well as the goals and construction plans for wind power, will be accelerated this year; all the previously announced targets will be significantly revised. Using reforms to promote the healthy development of the energy sector: At the end of 2008, as the major coal suppliers and the five major power generation groups refused to compromise on the prices of thermal coal, the 7-day \"2009 National Coal Production and Sales Coordination Contract Negotiation Meeting\" failed to break the deadlock in the conflict between coal suppliers and power generators over the past few years; no contracts were signed between the two sides. The head of the China Coal Transportation and Marketing Association said outright that the reason for the deadlock between coal producers and power generators lies not in prices, but in the fact that these companies operate under two different systems: the market system and the planned economy system. “The conflict between \"market coal\" and \"planned electricity\" is prominent, and within the coal industry as well, there exists a \"dual-system\" of \"contract coal\" and \"market coal\". Furthermore, due to the low concentration of large coal mines, with many small mines that are scattered and unorganized, **the ability to regulate coal production and supply is limited. In terms of petroleum, for reasons related to economic development and people’s livelihoods, the prices of refined oil products in our country are not fully aligned with international prices. In the first half of 2008, as international oil prices soared, there was a significant divergence between domestic and international prices, which affected companies’ willingness to produce and consequently impacted market supply. “The tight supply of thermal coal and the oil shortages in certain areas of the country are closely related to the current institutional mechanisms as well as the fiscal and pricing systems. ”Zhang Guobao pointed out that, influenced by the interests of various parties, it is very difficult to move reform forward, but without such reform, these problems cannot be completely resolved. Starting from January 1, 2009, our country decided to implement reforms regarding the prices of refined oil products as well as related taxes and fees. Six charges that were previously imposed in addition to the price of refined oil products were abolished, the fuel consumption tax was increased, and the mechanism for determining the prices of refined oil products was improved. Experts point out that, for now, due to insufficient demand, petrochemical companies are under significant profit pressure as oil prices fall. But in the long run, the reforms have established market mechanisms that are beneficial to the long-term development of energy companies. The successful advancement of reforms regarding refined oil prices and taxes relies on taking advantage of the decline in international crude oil prices. Affected by the international financial crisis, world economic growth slowed down, leading to a significant decrease in demand for oil, and international oil prices dropped steadily. “After the financial crisis, inflationary pressures in our country decreased, which helped to rationalize the price structure of energy products. ”Zhang Guobao pointed out that it is necessary to seize the favorable opportunities at hand, place greater emphasis on advancing institutional and mechanism innovation, and use reform measures to address the problems encountered in development. At present, our country is facing the severe challenge of insufficient energy demand. However, industry experts point out that accelerating the transformation of the energy development model, establishing an energy supply system that is \"stable, economical, clean, and safe,\" and deepening reforms in the energy sector are the only ways forward.
Hehe, thank you! Let’s get an understanding of future trends! I hope to get more guidance!
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The results of the latest round of national oil and gas resource assessments show that China currently has 36.8 trillion cubic meters of geological resources in coalbed methane deposits at depths of up to 2,000 meters, and 10.9 trillion cubic meters of recoverable resources in such deposits at depths of up to 1,500 meters. Completed over a period of 5 years by units such as the Oil and Gas Resources Strategy Research Center under the Ministry of Land and Resources, this assessment covers five major regions in China: the East, Central, West, South, and Qinghai-Tibet regions. It includes 42 gas-bearing basins (groups) such as Ordos, Qingshui, Junggar, Eastern Yunnan and Western Guizhou, Erenhot, Tuha, Tarim, Tianshan, and Hailar, as well as 121 gas-bearing areas. Geological resources amount refers to the total volume of coalbed methane that can be identified under current technical conditions, including both that has been identified (including that has already been extracted) and that has not yet been identified. The recoverable resource volume refers to the total amount of coalbed methane estimated at a given time – including that which has already been extracted as well as that which has not yet been discovered – and that can be extracted under foreseeable economic and technical conditions in the future. The evaluation results show that China’s coalbed methane resources are primarily distributed in four major regions: the East, Central, West, and South. The East region has geological resource reserves of 11.32 trillion cubic meters, with recoverable resources amounting to 4.32 trillion cubic meters, accounting for 30.8% and 39.7% of the country’s total respectively, making it the region with the richest coalbed methane resources in China. The geological resource volume of coalbed methane in the Central Region is 10.47 trillion cubic meters, while the recoverable resource volume is 2.00 trillion cubic meters, accounting for 28.4% and 18.4% of the national total respectively. The geological resource volume of coalbed methane in the Western Region is 10.36 trillion cubic meters, while the recoverable resource volume is 2.86 trillion cubic meters, accounting for 28.1% and 26.3% of the national total respectively. The geological resource volume of coalbed methane in the Southern region is 4.66 trillion cubic meters, while the recoverable resource volume is 1.70 trillion cubic meters, accounting for 12.3% and 15.6% of the national total respectively. The evaluation results indicate that China has abundant coalbed methane resources with broad development prospects; the resources are concentrated in certain areas, and a large proportion of them is suitable for exploitation. The coalbed methane industry is still in its infancy, while the market for this resource is gradually moving toward commercialization. The volume of coalbed methane resources is comparable to that of conventional natural gas, and effective exploration and development can serve as an important supplement to conventional natural gas. (Xinhua Net)
The equipment manufacturing industry is a fundamental sector that provides technical equipment for national economic development and defense construction. Vigorously revitalizing the equipment manufacturing industry is an important task outlined at the 16th National Congress of the Party; it is a strategic measure to establish and implement the scientific outlook on development, pursue a new path of industrialization, and achieve sustainable development of the national economy. After decades of development, China’s equipment manufacturing industry has achieved remarkable results, forming an industrial system with a complete range of sectors, considerable scale, and a certain level of sophistication; it has become an important pillar industry for the country’s economic development. However, China’s equipment manufacturing industry still faces issues such as weak independent innovation capabilities, a high degree of dependence on foreign sources, an unreasonable industrial structure, and low international competitiveness. To accelerate the revitalization of the equipment manufacturing industry, the \"Several Opinions of the State Council on Accelerating the Revitalization of the Equipment Manufacturing Industry\" issued in 2006 explicitly called for focusing on the development of key technical equipment in 16 fields, including large-scale clean and efficient power generation equipment, large-scale petrochemical plant equipment, large-scale coal mining equipment, large ships, high-speed trains, large-scale precision and high-speed CNC machine tools, and key equipment for integrated circuits. Our newspaper published a series of reports in 2006 titled “16 Key Areas of Focus for Major Equipment”. More than two years since the issuance of the \"Several Opinions,\" 16 major technical equipment projects have successively entered the implementation phase, **with various supportive and incentive policies as well as accompanying measures being introduced one after another. As of this year, it is of concern to all sectors to know to what extent 16 major technological installations have progressed. “Except for some equipment used in coal-to-oil and coal-to-olefins production, the rest of the equipment has been largely domestically produced. ”Sui Yongbin, Chief Engineer of the China Machinery Industry Federation, expressed approval of the research and development efforts regarding large-scale coal chemical plant equipment over the past two years. In recent years, the demand for energy and chemical products in our country has experienced rapid growth, and coal chemistry holds an important position in the fields of energy and chemicals in our country. With the further deepening of China’s energy structure adjustment, the coal chemical industry has experienced rapid development. The development of new processes and technologies in coal chemical industry poses new challenges to the upstream equipment sector, which in turn promotes technological progress in the coal chemical equipment industry. Major breakthroughs have been achieved in coal chemical technology and equipment. Since the development of large-scale coal chemical plant systems was identified as one of 16 key projects, China’s coal chemical equipment industry has experienced rapid growth, with the degree of domestic production of such equipment reaching 90%. An industry insider said. In the view of Sui Yongbin, the most significant achievement is the successful development of the reciprocating compressors with a piston thrust of 1.2 million tons, which are required for large-scale coal chemical industries, by Shenyang Blower Factory. Secondly, there has been a breakthrough in the production technology for high- and low-pressure diaphragm pumps used in coal chemical water-coal slurry processes, developed independently by Shenyang Metallurgical Machinery Co., Ltd. under China Nonferrous Metals Group. This means that the situation in which high-pressure diaphragm pumps were monopolized by foreign products will change. According to interviews by reporters from China Industry News, the high- and low-pressure diaphragm pumps developed by Shenye Machinery, which possess independent intellectual property rights, fill a gap in the domestic market. Their technical specifications and performance levels are on par with those of advanced international products of similar kind, and they hold great significance for the development of China’s coal chemical industry as well as for advancing equipment manufacturing technology. It is reported that to date, the company has supplied over 200 diaphragm pump units to more than 10 industries in China, holding a market share of over 90% in that market. Hu Qianlin, deputy secretary-general of the China Petroleum and Chemical Industry Association and secretary-general of the New Coal Chemical Industry Coordination Committee, said, \"The technology and equipment for coal-to-methanol and coal-to-dimethyl ether production in our country have been localized, while projects for coal-to-olefins and coal-to-oil production are also under development as demonstration projects.\" Significant progress has been made in the development of key equipment for large-scale coal chemical industries. ” Hu Qianlin explained, “At present, the capacity of a single methanol synthesis reactor developed independently in our country has reached 300,000 tons per year, and we already possess the technical foundation to build ultra-large-scale methanol production facilities with a capacity of 1.8 million tons per year.” China’s independently developed two-step process for dimethyl ether synthesis has seen the construction of multiple industrial plants with an annual capacity of 100,000 tons each, reaching international advanced levels. ” Coal gasification technology is among the world’s leading ones. Hu Qianlin told reporters that over the years, with the support of scientific and technological programs such as the 863 Program, and through collaboration among industry, academia, and research institutions, China has developed a number of advanced coal gasification technologies and achievements with independent intellectual property rights; in particular, large-scale coal gasification technology is now among the best in the world. Coal gasification technology is one of the key technologies for coal conversion and the efficient and clean utilization of coal. It serves as the cornerstone technology for the development in China of traditional coal chemical industries such as synthetic ammonia, as well as modern coal chemical industries characterized by the production of alcohol and ether fuels from coal, olefins from coal, and oil from coal. It is also a key and common technology for achieving energy conservation and emission reduction. For a long time, China’s large-scale gasification technology has been dependent on foreign sources; the country began to introduce foreign gasification technologies in the 1980s. It is estimated that the patent licensing fees for introducing gasification technology have reached over 200 million dollars. Not all of these technologies are perfect, and our country has become a testing ground for foreign gasification technologies. In October 2005, two multi-nozzle opposed coal-water slurry gasifiers with a daily processing capacity of 1,150 tons of coal were installed at Shandong Yankuang Guotai Chemical Co., Ltd., to produce 240,000 tons of methanol and generate 71.8 MW of electricity as a by-product. The two multi-nozzle opposed coal-water slurry gasification units established, with a daily processing capacity of 1,150 tons of coal, have saved over 60 million yuan in patent licensing fees, software package costs, and technical service fees compared to adopting foreign technologies. Hu Qianlin explained that to date, this technology has been adopted by more than 10 enterprises in China, with a total of over 20 gasification furnaces in use. The successful development of this technology has broken the monopoly of foreign companies in large-scale gasification technology, achieving a breakthrough from scratch in this field in China. In addition, our country has made significant breakthroughs in domestically developed coal gasification technologies such as gray fused-bed gasification technology, new gasification technology for multi-component slurries, and pressurized coal gasification using pulverized coal. Multiple domestic institutions have jointly carried out research on two-stage pressurized dry coal powder gasification technology; a pilot plant equipped with a water-cooled wall gasifier capable of processing 24 tons of coal per day was built, and the pilot studies were completed. The results obtained have laid the foundation for further scaling up this technology on an industrial scale. With the support of projects under the 11th Five-Year Plan’s 863 Program, a multi-nozzle opposed coal pressurized gasification technology capable of processing 1,000 tons of coal per day is being implemented in Guizhou. China’s first set of HT-L coal pressurized gasification furnaces was also successfully commissioned in October last year. The industrial demonstration project for the domestically developed non-slag–slag staged oxidation gasification technology has also been completed and put into operation, with its technical parameters reaching international advanced levels. Critical equipment requires urgent improvement. Although significant progress has been made in the development of large-scale coal chemical plant equipment in China, there is still a considerable gap compared to foreign countries in the manufacturing of key components. “In coal chemical plant equipment, some key pumps and valves still have to be imported, so efforts to develop alternatives are needed. Additionally, certain special steels and aluminum alloys cannot be produced domestically at present, and progress is still required in the area of high-end raw materials. ”Hu Qianlin said. To better develop coal chemical technology and equipment in order to meet the needs of China’s energy structure adjustment. Hu Qianlin put forward four suggestions: First, encourage the use of advanced, independently developed technologies and domestically produced equipment. The policies regarding technical equipment in the coal chemical industry should emphasize advanced technologies, energy conservation, water conservation, and environmental protection principles. Encouraging the use of domestically developed technologies to build large-scale coal chemical projects. The independently developed technologies that currently meet or are close to meeting the requirements for industrial application include coal-water slurry gasification technology, large-scale methanol synthesis technology, gas-phase two-step dimethyl ether production technology, indirect coal-to-synthetic oil technology, direct coal-to-synthetic oil technology, and methanol-to-olefins technology (DMTO), among others. In engineering construction, domestically developed technologies should be given priority. To advance the engineering and scale-up of independently developed technologies, it is recommended to **provide capital support for several industrialization verification or demonstration projects, including domestic demonstration projects for independently developed technologies for producing olefins from methanol (DMTO) and propylene from methanol (MTP), industrial demonstration projects for indirect liquefaction, and industrialization verification projects for large-scale gasifiers.** Relying on coal chemical demonstration projects, efforts are being made to promote the localization of coal chemical equipment. Focus is placed on the research and development of large-scale gasifiers with a daily coal input of over 2,000 tons, as well as large-scale air separation units, compressors, and synthesis reactors. The goal is to develop the capability to produce complete sets of equipment for large-scale ammonia, methanol, dimethyl ether, olefin, and coal-to-oil production facilities, and there is encouragement and promotion of the use of large-scale domestic equipment sets. Second, rely on key projects to promote the localization of equipment and overcome certain critical technical devices. **For the complete sets of equipment required for key projects, goals for domestic manufacturing should be set. For any case requiring the import of major equipment, the user entity, domestic manufacturers, and design firms should jointly develop a plan for domestic production and conduct international bidding. Domestic manufacturing firms and multinational companies submit joint bids, using the domestic market in exchange for technology transfer from foreign companies, thereby gradually improving the manufacturing capabilities of domestic firms. We should draw on the successful experience of the Three Gorges Dam and, in various industries, rely on key infrastructure projects to promote the independent manufacturing of technical equipment. Overcome the challenges related to the development of special materials for manufacturing gasifiers and reactors, as well as special valves such as oxygen valves, lockhopper valves, slurry valves, and slag-water valves ； Transmission equipment such as high and low pressure coal slurry pumps in the gasification system. Third, accelerate the formulation of policies on technical equipment for the coal chemical industry. Fully leverage the role of standardization in revitalizing the equipment manufacturing industry, raise the levels of national standards, industry standards, and enterprise standards, use these standards to phase out outdated technical equipment, and promote industrial upgrading and technological progress. Encourage the use of domestic equipment, especially first-generation products, to facilitate the connection between production and sales, and to create a fair competitive market environment as well as favorable conditions for manufacturing enterprises. Fourth, accelerate the establishment of **-level coal chemical technology R&D and engineering transformation institutions. It supports the research and development of coal chemical technology and equipment, as well as the construction of demonstration projects. Actively promote industrial trials and the construction of demonstration projects in coal chemical industry, and accelerate the industrialization of coal-based oil products and olefins. (China Industry News)
This year, the construction of large-scale coal-fired power bases will accelerate significantly, which is undoubtedly a catalyst for advancing the \"coal-power integration\" industrial model. In response, experts in the coal industry argue that the accelerated development of coal-fired power bases will prompt coal mines and power companies to adopt the Shenhua model, thereby changing the current layout of China’s coal-fired power industry. According to the information from the first National Energy Work Conference currently underway, the construction of the 13 large-scale coal power bases with an annual production capacity of 100 million tons each, which are planned across the country, will accelerate significantly this year. This year, the construction of coal power integration projects in Xilin Gol League and coal power bases in Shanxi will begin, and gradually, a power transmission capacity of 3 million kilowatts to Liaoning and 4 million kilowatts to Shandong will be established. In fact, at the end of last year, the Lianghuai coal and power base, which is the first of China’s 13 large-scale coal bases with an annual production capacity of 100 million tons to be completed and put into operation, came into existence. Wang Yuan, chairman of Huainan Mining Group, revealed in an interview with our newspaper that the Lianghuai coal and power complex, developed through over 5 years of effort, includes 12 new mines, resulting in an additional coal production capacity of 30.4 million tons ； 8 new and expanded power plants were built, adding 8.07 million kilowatts of generating capacity. Furthermore, the group expects its coal production for the entire year 2008 to reach 120 million tons. ??The Lianghuai coal and power production base is led by Huainan Mining Group; it does not cooperate with any other company such as China Power Investment, State Power Investment, or Zhejiang Electric Power. All new production of coal and electricity in this area comes from Huainan Mining Group. ”An expert in the coal industry told the Shanghai Securities News that at present, any energy company, whether it is a coal enterprise or a power company, will strive to develop into a comprehensive energy group as long as the market entry barriers are low. ??Both coal and power companies want to \"clone\" the Shenhua model in order to achieve integration of coal, power generation, and transportation. For example, the Hulunbuir region is being developed primarily by the power group Huaneng. ”The official said. In response to this, the head of the Energy Bureau stated clearly at the meeting that cooperation across industries, regions, and ownership structures should be encouraged, and that industries related to coal, electricity, transportation, ports, and chemicals should work together or develop in an integrated manner. State-owned large-scale coal enterprises are called upon to play a key role in ensuring a stable supply of coal. ??However, it is worth noting that the opportunities for encouraging joint operations or integrated development in related industries are equal for large coal and power companies; it is crucial to be the first to seize such opportunities. „Generally speaking, the construction of coal power bases is highly beneficial for existing large coal companies, as it makes it easier for them to access coal reserves.“ ”said Wang Shuai, the leading analyst in the coal industry at Orient Securities. It should be noted that the layout of the domestic coal-fired power industry may change as a result. ??For example, on January 4 this year, Shanxi Province and Shandong Province signed an agreement in Beijing for the transfer of electricity from Shanxi to Shandong. The plan is to transform the coal resources available in those regions into a comprehensive coal industry ecosystem through structural reorganization and industrial expansion, shifting from transporting coal to transporting electricity. This approach aims to advance a strategy for integrated coal and electricity production, thereby opening up new paths for the development of Shanxi’s coal resources. Furthermore, the accelerated construction of large-scale coal-fired power bases will also have a profound impact on the layout of the coal industry itself. ??\"In the future, the coal industry will become increasingly concentrated in large-scale production bases; it is expected that the output from these 13 industrial bases will gradually reach 2 billion tons, which will further reduce the living space for small and medium-sized coal mines.\" ”The aforementioned coal industry expert said. Furthermore, the development of large-scale coal power plants will require the construction of safe and efficient mines as well as the advancement of industrial upgrading, which will increase the demand for various coal mining equipment and create investment opportunities for new modern coal mining machines. (Petroleum China Network)
In December 2008, the growth rate of raw coal production continued to decline rapidly, from 5.2% in November to -1.3% in December, while the growth rates of production in sectors with high coal demand, such as thermal power, metallurgy, building materials, and chemicals, began to show a slight rebound. As various industries begin to show signs of recovery, coal prices have found support at their current levels, resulting in a pattern of fluctuation and consolidation. In January 2009, the average price of coal traded in the national market also rose slightly, reaching 606.15 yuan per ton, compared to 582.84 yuan per ton in December 2008; this represented an increase of 18.68% compared with the same period the previous year. In December 2008, the total volume of coal transported by rail across the country was 98.1 million tons, representing a year-on-year decrease of 7.12%. This marks the first negative growth in coal railway shipments since last year. This reflects, to some extent, that due to weak demand downstream, the main coal-producing areas and manufacturers have proactively controlled production, resulting in a significant drop in coal transported by rail and thereby alleviating the already imbalanced supply and demand for coal. In January 2009, the coal industry index continued its upward trend started in December of the previous year, performing significantly better than the CSI 300 index; its monthly gain was around 25.2%, which was far higher than the 11.83% increase recorded by the CSI 300 index during the same period. The reasons for the strong trend may lie in the following aspects: first, there are signs of recovery in industries that rely on coal, and demand for coal is likely to increase gradually ； Secondly, coal prices began to rise slightly; in January, the prices of all types of coal saw a modest rebound from their lowest levels ； Third is the correction of the overly low valuations of listed companies in the coal industry ； Fourth, planned production cuts and the closure of small coal mines may bring supply and demand for coal in the country back to a state of overall balance. Controlling coal supply has a positive impact on the stable operation of coal prices. At present, various regions **are gradually stepping up efforts to regulate small coal mines. Shanxi Province has ordered small coal mines there to suspend operations for safety reasons, while Henan Province requires all mines with an annual production capacity of 300,000 tons or less to cease operations for rectification. Jiangxi Province has allocated 50 million yuan in incentives to encourage small coal mines with an annual production capacity of less than 30,000 tons to close down as required. Sichuan Province has also formulated a short-term plan for shutting down such mines. It is also reported that in 2009, Shanxi may shut down or cease operations at all small coal mines with a production capacity of less than 600,000 tons. In addition to the decline in production from small coal mines, large coal companies in Shanxi, a major coal-producing province, have also reduced their output by nearly 30%. So far, measures to actively control supply have begun to show results, with prices for various coal types having rebounded to some extent. Following the recent continuous recovery, the average price-earnings ratios for China’s coal industry for the 2008-2009 period have now reached 10.43 and 9.18 times respectively, which are higher than the average price-earnings ratios of **7.59 and 7.92 times in the domestic market, as well as 6.92 and 5.52 times in foreign markets. Given that the domestic economic situation is better than the international environment, we believe there is little room for a decline in domestic coal prices in the future. Moreover, the relative valuation of coal-related listed companies remains low, and many of these companies offer high dividend rates; therefore, the coal industry still holds long-term investment value. (Securities Times)