The Coal Industry

Despite efforts to diversify energy sources, China is expected to reduce its reliance on coal by only 10 percent by 2020: coal is readily available, under Beijing’s direct control, and influences a large portion of the country’s labor force. A 10 percent reduction will result in a major change in that force but will likely be balanced economically by advantages gained by shifting to cleaner, more efficient energy sources.²⁴ Although other energy sources are expected to grow, China’s main energy source for the foreseeable future will remain its very extensive coal reserves (see figure 4). Coal’s 75 percent share of China’s primary energy supplies produced over 62 percent of commercial energy consumption. According to the Coal Industry Ministry, coal remains “the indispensable energy source for China’s economic development.”²⁵

China’s estimated total coal resources are second only to those of the former Soviet Union, although it ranks third in the world in proven reserves (behind the United States and the former Soviet Union), due mainly to a lack of exploration. China has concentrated its resource development efforts on the higher-grade bituminous and anthracite coal that makes up more than half of its estimated 126 billion tons²⁶ of reserves; bituminous coal accounts for about 75 percent of annual production, and anthracite most of the rest.
Three-quarters of the electricity generated in China is coal-fired, and its coal industry is the world’s largest, producing nearly 1.4 billion tons in 1996. The growth of coal production was originally forecast to reach about 1.5 billion tons by the year 2000 and 2.1 billion tons by 2010, but recent government moves to match production levels to slowing consumer demand resulted in approximately 1.1 billion tons produced in 2000.
As of late 1999, about 39 percent of Chinese coal consumption was consumed in power stations, 14 percent for coking, 10 percent for domestic and residential use, 1 percent for rail, and the rest by other industries such as chemical, cement, ceramics, and glass-making plants. By contrast, the United States burns 87 percent of its coal in power utilities.²⁷ Plans for power station development provide for coal as the primary fuel.
In 2000, China consumed an estimated 1.68 billion short tons of coal, by far the largest national consumption in the world, with the United States in second place at 1.09 billion short tons. This figure is expected to grow to 3.54 tons by 2020, dramatically increasing China’s position as the world’s largest consumer of coal.²⁸ Coal exports also continue to increase, to almost 21 million tons during the first half of 2000, a 45- percent increase over the same period in 1999. Beijing still faces an oversupply of coal, a problem it is trying to solve by closing thousands of small-scale coal mining operations.²⁹
As a result of the extensive reorganization that began in the late 1990s, less than half of China’s coal production is now centrally administered, with the majority produced by either local state-owned mines or rural collectives. In the early 1980s, the central government began to encourage the development of small coal mines in rural areas; many of these mines are individually owned. Amendments to China’s Mineral Resources Law, effective January 1997, provide a comprehensive legal framework for exploration and exploitation and could encourage foreign investment.
Northern China, especially Shanxi Province, contains most of China’s easily accessible coal and virtually all of the large state-owned mines. Coal from southern mines tends to be higher in sulfur and ash, therefore unsuitable for many applications. Regional imbalances between coal supply and demand require the transporting of large quantities of coal, generally from northern areas to the south and east.
In fact, coal accounts for a larger percentage of freight than any other commodity in China. More than 50 percent of the coal is shipped by rail, and 60 percent of rail transport is tied up in transporting coal. The major north-south rail lines are Zhengzhou-Wuhan and Xuzhou-Nanjing, and the primary east-west line is Datong-Qinhuangdoa. Transportation bottlenecks are a major problem in the coal industry, with the high content of dirt and rocks included in shipments (only 20 to 25 percent of coal is now washed) further taxing the system. Recommended solutions include rail expansion projects and alternatives such as coal pipelines, liquefaction, and coal-by-wire (locating power plants at mine mouths).
The China National Coal Import and Export Corporation is the primary Chinese partner for foreign investors in the coal sector; this corporation is overseeing a process more open to foreign investment, particularly in modernizing existing large-scale mines and the developing new ones. Areas of interest in foreign investment concentrate on new technologies only recently introduced in China or with environmental benefit, including the coal liquefaction, coal bed methane production, and slurry pipeline transportation projects. These projects also promise to increase the efficiency of the transportation system.³⁰ In addition to collocating coal-fired power plants with large mines, other technological improvements are being undertaken, including the first small-scale projects for coal gasification, and a coal slurry pipeline to transport coal to the port of Qingdao.
China is an increasingly important participant in the international coal exporting market. Beijing tripled its coal exports between 1980 and 1990, as newly built coal washing, rail, and port facilities made more of its high-quality coal available for export. Beijing announced net coal exports for 1998 of 35 million tons, with sales primarily to South and North Korea and to Japan. Japan not only is China’s biggest customer but also has become a partner in the industry, providing loans for the improvement of railroads and ports for the overseas transport of coal from Shanxi Province. A 5-year agreement for Chinese energy exports to Japan was negotiated in December 2000.³¹
As China commits itself to further economic reform and increased involvement in the global economy, its coal industry faces major challenges of rationalization and structural reform. The government is implementing major reforms to reduce the effects of the current oversupply problem, at least in the short term. Large state-owned coal mines have experienced buildups of unused inventories, and many are operating at a financial loss. A large number of small, unlicensed mines also contribute to this situation.
Coal usage is also very susceptible to swings in the Chinese economy. This has influenced the recent overhaul of the state coal administration, radical cuts in production, the restructuring of key state-owned coal mines, and the planned closure of over 25,000 small mines. In 1998, the government launched “a campaign to shut thousands of coal mines, especially small and dangerous ones, to avoid overproduction, falling prices, and to improve the industry’s safety record.”³²

Poor Safety Record

One report, in early April 2002, stated that 59,000 of an estimated 82,000 illegal small coal mines have been closed, but another claimed that 430,000 had ceased operation. Neither figure is likely definitive, given the central government’s apparent lack of an effective regulatory infrastructure in this area.³³ This campaign appears to have achieved mixed results; as a result of the closures, depressed local coal prices have started to recover, but supply still outpaces demand.
The government reported that 5,395 miners died in mining-related accidents in 2001, but other estimates range to up to 10,000 miners dying annually with perhaps thousands more dying each year from lung diseases.³⁴ Most of these occurred in the many small, unregulated mines.
Ninety-two miners died in a Jiangsu Province gas explosion in July 2001, while in September, at least nine miners died in an explosion at an illegal coal mine; in November, 37 died in two coal mine blasts in a mine in Podi, Shanxi Province, that had been ordered closed and was “operating without government permission.” That same month, another explosion claimed at least 14 miners.³⁵ The operators of the Podi mine were quickly tried and sentenced to prison terms, but the accidents continue; in December 2001 alone, 11 died in Hunan, 15 in Henan, 8 in Liaoning, and over 20 in Jiangxi Provinces.³⁶
The national government had turned its full attention to attempting to regulate the industry even before this latest series of disasters. In addition to directing the closure of many small mines, Beijing issued a completely revised set of coal mine safety regulations, which took effect December 1, 2000.³⁷ These include “supervision of safety in coal mines” by the Coal Mining Safety Supervisory Organization as an arm of the State Council. Mirror safety organizations also exist at provincial, autonomous regional, and autonomous municipal levels (Article 8). Governmental frustration with coal entrepreneurs and mine owners is indicated in Article 6, which states that “coal mine safety supervision shall rely on miners and union organizations.” The regulations include detailed requirements for the construction, equipping, and operation of coal mines—and provide penalties, including mine closure, for noncompliance.³⁸ The leadership also began paying personal attention to the problem, as then Vice Premier Wu Bangguo visited coal miners in Shanxi Province, and Vice Premier Wen Jaibao did the same in Liaoning.³⁹
China’s mining safety record remains horrendous, however, with a continuing series of disasters that the government seems unable to halt. Notwithstanding the new regulations and “billions of yuan put into improving mine safety,” the government reported a recorded 556 coal mine accidents in just the first quarter of 2002, causing 994 deaths.⁴⁰ Reported accidents in early 2003 indicated that a solution to the mining accident problem remained lacking. Eight miners died in Jilin Province,38 in Heilongjiang, 8 in Henan, and at least 38 in Guizhou.⁴¹

Prospects for Coal

Despite these problems of inefficiency and safety, China’s coal output continues to rise, and exports are profitable.⁴² Coal will almost certainly remain the dominant energy source in China for the foreseeable future, despite the strenuous efforts of the authorities to diversify the energy mix.
While the infrastructure for coal transport, including rail and ports, has improved significantly over the past 8 years, it remains inadequate to meet current demand.⁴³ In fact, imports of coal have risen in coastal regions, due to the inefficiencies of domestic rail transport. However, the completion of the Shuo-huang railway (the second dedicated coal line) and the Huanghua coal terminal in 2003 will provide up to 60 million tons per year of new coal transport capacity in northern China. The first section of this railway began operation in December 2000; it is planned as part of a system to link the coalfields of the Ningxia Hui and Inner Mongolia Autonomous Regions to coastal China.⁴⁴
China is not making the large investment necessary to build the infrastructure required to take efficient advantage of its huge reserves of coal, which will continue as its primary energy source. This situation is exacerbated by the scarcity of investment capital and water shortages that restrict efforts to improve the quality of the coal through the greater use of coal washing plants. China’s relatively unsophisticated heavy industrial plant further means general satisfaction with low-grade coal, cheaper but both less efficient and more polluting. Hence, the resulting lack of demand for better quality coal and the absence of a fair pricing regime to reflect the value of coal quality constrain the modernization of the nation’s coal industry as a whole.
While the high level of coal usage—both in real terms and as a percentage of energy production—will continue and even grow, how coal is utilized will change. Residential and domestic coal consumers typically contribute disproportionately to the high pollution levels. As more in this sector are provided with electricity and gas, they will burn less coal, lowering pollution. No such decrease in pollution seems apparent in the future of the industrial sector, however, where many boilers and plants have low thermal efficiency and lack modern pollution control equipment. National and provincial authorities will have to both mandate more stringent pollution limits and offer financial incentives to meet those limits.
Coal bed methane may provide one alternative, with reserves estimated at 30 to 35 trillion cubic meters (tcm) and production expected to reach 0.4 tcm by 2010.⁴⁵ China recently launched a project on the “Research and Application of Underground Vaporization of Coal” to attempt to increase recovery of this combustible gas for commercial use.⁴⁶
Coal bed methane production is being developed under the aegis of the China United Coal Bed Methane Company signing agreements with 19 foreign companies, including American investors Atlantic Richfield and Texaco, the latter signing 3 production contracts. This joint -effort will explore coalfield blocks in Inner Mongolia, and Shaanxi, Shanxi, and Anhui Provinces.⁴⁷ Another joint venture project is planned for Yunnan Province.⁴⁸
New technology may affect China’s entire energy use profile in a dramatic fashion. Should the current U.S. program to develop direct carbon conversion bear fruit, the process would help to conserve precious fossil resources by allowing more power to be harnessed from the same amount of fuel. It would also improve the environment by significantly decreasing the amount of pollutants produced per kilowatt-hour of electrical energy generated, including decreasing carbon dioxide emissions.⁴⁹

Endnotes

²⁴Frank Umbach, “China’s Energy Policy,” Internationale Politik (Transatlantic Edition) (Summer 2001), 88. [BACK]

²⁵Wang Xianzheng, quoted in Jin Tian, “Energy Structure Calls for Fine-Tuning,” China Daily (Business Weekly Supplement), June 18, 2002, in FBIS-CPP2002061800063. Wang has since become vice governor of Shanxi Province—China’s largest coal-producing province. [BACK]

²⁶Coal is measured in “short tons,” unless otherwise noted. One short ton equals 2,000 pounds (or 908 kg or 0.89 long tons or 0.91 metric tons). [BACK]

²⁷“Coal in the Energy Supply of China: Executive Summary,” November 1999, accessed at <www.iea.org/pubs/studies/files/coachi/coachi.htm>, 1–3. [BACK]

²⁸Table A–6, “World Coal Consumption, 1990–2020,” in “International Energy Outlook 1999,” DOE-EIA, accessed at <www.eia.doe.gov/oiaf/ieo99/tbla1-8.htm>, 9. No other nation exceeds 400 mst in 2000; U.S. coal consumption in 2020 is estimated at 1,275 mst. [BACK]

²⁹Ibid., 3. Increased coal exports are discussed in “China’s Coal Export Up 45.6 Percent in 2000,” Xinhua, July 6, 2000, in FBIS-CPP20000706000010; also see Gong Zhengzheng, “Oil Prices to Fire Up Domestic Coal Exports,” China Daily (Business Weekly Supplement), April 30, 2002, in FBIS-CPP200204030000073.
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³⁰The foregoing discussion relies heavily on DOE-EIA, “Country Analysis Brief of China.” “China, U.S. to Jointly Develop Coalbed Methane,” Xinhua, March 3, 2003, in FBIS-CPP20030303000173.
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³¹Reported in “China and Japan Reach Oil and Coal Framework Agreement,” Reuters, December 14, 2000, in Alexander’s 6, no. 1 (January 11, 2001). [BACK]

³²“Accidents in Hunan, Guangxi Claim Lives of 41 Miners,” China Daily (Hong Kong), January 9, 2001, in FBIS-CPP20010109000029. [BACK]

³³The smaller number is in Jiang Zhuqing, “Thousands of PRC Illegal Mines Shut Down; Billions Invested to Improve Safety,” China Daily, April 10, 2002, in FBIS-CPP20020410000019. In “China to Shut Down More Small Coal Mines, Decrease Accidents by 10 Percent,” Xinhua, April 10, 2002, in FBIS-CPP20020410000001, a “government official” announced a goal for 2002 of reducing the total number of illegal mines to 15,000. The larger number is cited in Jin Tian, 2. [BACK]

³⁴The government figure is cited in Jasper Becker, “PRC Issues New Health, Safety Regulations for Mining Industry,” South China Morning Post (Hong Kong), December 19, 2000, in FBIS-CPP20001219000063. “Thirty-One Trapped After Coalmine Gas Explosion in Northeast China,” Agence France-Presse (henceforth AFP), November 6, 2000, in FBIS-CPP20001106000111, cited the 10,000 figure. “Accidents in Hunan, Guangxi Claim Lives of 41 Miners” reports, “Coal mine accidents have claimed more than 5,300 lives in China in the past year.” Also see “Poor Safety Kills 162 Coal Miners in Southwest China,” which reports 162 miners dying in a September 27, 2000, mine explosion in southwestern Guizhou Province; and “China Mine Manager Arrested After Explosion Toll Rises to 41,” AFP, December 10, 2000, in FBIS-CPP20001210000018, which reports that “also detained were five mine workers accused of beating up journalists and miners...in an attempt to cover up the explosion.” Also see “East Asia: The Energy Situation,” DOE-EIA (August 1999), accessed at <www.eia.doe.gov/emeu/cabs/eastasia.htm>, 3. [BACK]

³⁵“Local Authorities Sue Six for Fatal Mine Explosion,” Xinhua, December 27, 2001, in FBIS-CPP20011227000060, reported that an additional seven persons were being prosecuted by the government, including the “deputy secretary of the [local] Committee of the CCP”; “Nine Missing, Presumed Dead in Coal Mine Explosion in Central PRC,” AFP, September 19 2001, in FBIS-CPP20010929000297; “Gas Blasts Kill 37 in Two Coal Mines,” South China Morning Post, November 17, 2001; accessed at <http://china.scmp.com/ZZZ7JGD81UC.html>; “Police Arrest Four for Mine Disaster,” China Daily, November 19, 2001, in FBIS-CPP20011119000015; “Small Coal Mines in Shanxi Ordered to Stop Production for Safety,” Xinhua, November 19, 2001, in FBIS-CPP20011119000096. [BACK]

³⁶“Individuals Responsible for 15 November Coal Mine Explosion Receive Prison Sentences,” Xinhua,December 7, 2001, in FBIS-CPP20011207000068; “Coal Mine Explosion Kills 11 in Central China,” Xinhua, December 14, 2001, in FBIS-CPP20011214000119; “Fifteen Miners Missing in China Mine Flood,” AFP, December 25, 2001, in FBIS-CPP20011225000064; “Coal Mine Blast Kills Eight in Northeast China,” Xinhua, December 29, 2001, in FBIS-CPP200112290000119; “Gas Explosion in Jiangxi Coal Mine Kills 20, Injures 24,” Xinhua, December 31, 2001, in FBIS-CPP20011231000039. [BACK]

³⁷“Zhu Rongji Signs Order No. 296 of the PRC State Council,” Xinhua, November 14, 2000, in FBIS-CPP20001114000019. [BACK]

³⁸Chapter 4 of the new regulations, in “Apparent Full Text of Regulations on Supervision of Coal Mine Safety,” Xinhua,November 14, 2000, in FBIS-CPP20001114000032; “PRC: Zhu Rongji Signs Order on Coal Mine Safety Rules,” Xinhua, November 4, 2000, in FBIS-CPP20001114000019, reported that the premier personally signed the new regulations. [BACK]

³⁹“Wu Bangguo Visits ‘Disadvantaged’ Coal Miners in Shanxi,” Xinhua, January 14, 2003; “Vice Premier Wen Jaibao Spends Holiday with Coal Miners, Urges Improved Safety,” Xinhua, February 1, 2003. Wu has since assumed the position of head of the National People’s Congress, while Wen has become prime minister, both among the top five leaders in China. [BACK]

⁴⁰Jiang Zhuqing reported 2 billion yuan “spent on 103 safety improvement projects,” but all in state-owned mines. In the first 3 months of 2002, 27 miners died in Hebei coalmine explosion, 23 were lost in Sichuan, 22 were killed in Henan, at least 24 died in Heilongjiang, and an unknown number died in coal mining accidents in Hubei and Liaoning provinces; see Chu Xuejun, “Major Gas Explosion,” Xinhua (Hong Kong), April 25, 2002, in FBIS-CPP20020425000083; Yang Haibin and Lin Su, “Heilongjiang Coal Mine Explosion Kills 24,” Xinhua (Hong Kong), April 10, 2002, in FBIS-CPP20020410000109; also, Bill Savadove, “22 Die in China Coal Mine Blast,” South China Morning Post, April 2, 2002, in FBIS-CPP20020402000049; “Coal Mine Explosions in Northern China Kill 27,” Xinhua, January 27, 2002, in FBIS-CPP20020127000069; “Seven Chinese Miners Die of Gas Carbon Monoxide Poisoning,” AFP, February 24, 2001, in FBIS-CPP20020224000021; “Three Dead, 19 Missing in Coal Mine Fire in Liaoning,” AFP, March 4, 2002, in FBIS-CPP20020304000157; Da Yong, “Coal Mine Disaster Kills 1, Traps at Least 5 Victims in Liaoning,” China Daily,March 19, 2002, in FBIS-CPP20020319000035. [BACK]

⁴¹These accidents are reported in “Death Toll Rises to Eight in Jilin Coal Mine Accident,” Xinhua,January 11, 2003; “Rescuers Race to Reach 32 Miners,” AFP, January 12, 2003; “Gas Leak Kills 18 Henan Province Miners,” Xinhua, January 24, 2003; “Heilongjiang Coal Mine Blast Traps Six,” Xinhua, February 25, 2003; “Coal Mine Explosions in Guizhou, Heilongjiang Kill 35,” China Daily, February 26, 2003; Shih Hsueh-ya, “[Vice Premier] Wu Bangguo Makes Written Comments on Gas Explosion at Guizhou Coal Mine,” Wen Wei Po (Hong Kong), February 28, 2003. [BACK]

⁴²“China Reports Rises in Coal Production, Marketing,” Xinhua, December 29, 2001, in FBIS-CPP20011229000086; “China’s Coal Exports Said Profitable for ‘First Time in Years’,” Xinhua,December 24, 2001, in FBIS-CPP20011224000006. [BACK]

⁴³“China to Import More Coal,” Xinhua, February 13, 2003. An American engineer involved in building and operating large, coal-powered generating plants in Fujian Province told the author in February 2000 that coal could be more cheaply and reliably imported from Australia than from Manchuria. [BACK]

⁴⁴“First Section of ‘Major Coal Transport Railway’ Opens in Inner Mongolia,” Xinhua, December 16, 2000, in FBIS-CPP20001216000078. [BACK]

⁴⁵“China, U.S. Jointly Develop Coalbed Methane,” Xinhua, March 3, 2003. [BACK]

⁴⁶“Underground Vaporization of Coal Passes PRC Ministerial Test,” Xinhua, November 15, 2000, in FBIS-CPP20001115000016. [BACK]

⁴⁷See “U.S. Firm Joins Methane Project,” China Daily, March 4, 2003, “PRC, U.S. Companies to Jointly Explore Coalbed Methane,” Xinhua, January 8, 2003, and “China Signs Coal-bed Methane Contracts With U.S. Texaco Petroleum Company,” Xinhua, November 8, 2000, in FBIS-CPP20001108000114, 1. Also see Xu Dashan, “PRC, Canada Sign Memorandum to Develop China’s Coalbed Methane Technology Project,” China Daily, March 29, 2002, in FBIS-CPP20020329000032. [BACK]

⁴⁸ “China, U.S. to Jointly Tap Coal Bed Methane Resources in Yunnan,” Xinhua, December 3, 2002, in FBIS-CPP20021203000181. [BACK]

⁴⁹This intriguing program is being led by Lawrence Livermore Laboratory; see John Cooper, “Turning Carbon Directly into Energy,” Science and Technology Review, June 2001, accessed at <www.llnl.gov/str/June01/Cooper.html>. [BACK]