China’s Coal Shortage May Persist in First Quarter

By Bloomberg News

Jan. 25 (Bloomberg) -- China, the world’s second-biggest energy consumer, may continue to face a coal shortage until the end of March because of winter demand, the government said.

Coal demand has increased faster than anticipated since the fourth quarter because of accelerating growth in power generation, steel production and metal processing, the National Energy Administration said on the government’s Web site today. China relies on coal for about 80 percent for its power output.

Demand for heating, power and coal surged as China faced its coldest winter in at least 50 years while the government’s $586 billion stimulus spending spurred energy consumption. Domestic benchmark coal prices have risen about 40 percent since July, the energy bureau said.

“If domestic supply cannot catch up with demand, coal prices in China may continue to rise,” Martin Wang, an analyst with Guotai Junan Securities in Hong Kong, said by phone.

Manufacturing grew at its fastest pace in 20 months in December while electricity generation rose 16 percent. The Chinese economy will expand four times faster than the U.S. in 2010, the United Nations said last month. There’s still “lots of room” for energy demand to grow, the energy bureau said.

Domestic coal output may rise about 5 percent this year while coal import growth is likely to slow as potentially higher global demand pushes up higher, the energy administration said.

China’s coal output gained 13 percent in 2009 while electricity generation increased by 7 percent, the government said on Jan. 21.

Energy Demand Growth

Energy demand growth may be faster in the first half than in the second, the bureau said, without elaborating. China’s electricity generating capacity may increase to 960,000 megawatts by the end of 2010, it said.

The country’s fuel demand may recover and increase by about 4 percent this year, it said. Additional oil refining capacity may exceed 20 million tons and the domestic fuel market will remain “oversupplied in general,” it said.

Separately, China has started building liquefied natural gas receiving terminals in Shandong and Hainan, it said, without giving details.

--Wang Ying, with assistance from Winnie Zhu. Editors: Ryan Woo.

To contact the reporter on this story: Ying Wang in Beijing at ywang30@bloomberg.net