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Coal Still King

Posted on Jun. 30, 2006

On May 18, Yang Qinan, a migrant coal miner from Henan province, was slapped in the face by his boss at the Xinjing coal mine in Zouyun county in China’s northern Shanxi province for refusing to dig in a coal shaft that seemed to be leaking.

That slap saved Yang’s life. On that day, 57 of Yang’s co-workers died when the mine flooded. Initial investigations attributed the accident to overproduction. The government allows the Xinjing mine to produce only 90,000 tons per year, but in the first two months of 2006, production was 50,000 tons. Before going into hiding, in an attempt to cover up the disaster the mine’s owner reported that only five miners were killed. Other employees at the mine apparently tried to remove the miners’ families from the site so they couldn’t speak to the media. But news of China’s latest coal mining disaster could not be contained.

The tragedy at the Xinjing mine is only one of dozens of deadly accidents that occur in China’s coal mining sector every year. China’s mines are, by far, the most dangerous in the world. This disaster is the seventh in Zouyun this year. Chinese government figures estimate that about 6,000 workers were killed in the country’s coal mines last year alone.

The Chinese government ignores the human cost of its coal addiction because the black fuel powers its economy. Indeed, although the world’s media outlets are obsessed with China’s soaring oil use, the stunning fact is that oil’s share of China’s total primary energy consumption is actually declining, albeit slightly. Between 2000 and 2004, oil’s share of China’s total energy use fell by about one percent. That fact is easy to understand considering that China’s coal production has more than doubled over the last five years, with production hitting a record 2.1 billion tons in 2005.

Coal Mining Fatalities

This year, China will burn more coal than the United States, the European Union, and Japan combined. China is by far the world’s biggest coal producer, accounting for one-third of the world’s total. Large production has led to large coal inventories. Last year, the country’s coal stocks totaled 140 million tons, an all-time high. The government has decided to limit the production to 2.45 billion tons by 2010, and requires that the rate of reserves be over 40 percent at all existing and new coal mines by 2010.

That surging coal production will continue. According to the Ministry of Land and Resources, China’s proven coal reserves are 188.6 billion metric tons, averaging 145 tons per capita. These reserves are located in 27 of China’s 31 provinces, covering 550,000 square kilometers.

These coal reserves are allocated unevenly across the country. About 65 percent of China’s 2005 coal production came from nine provinces: Shanxi, Shandong, Henan, Inner Mongolia, Shaanxi, Hebei, Liaoning, Heilongjiang and Guizhou, where the demand is much lower, compared with that in the east and south. Coal is transported from the main producing provinces to the cities of Beijing and Tianjin and to eastern China and the mid-south provinces. These all have a high demand for coal, but have little or no production of their own.

In a major move to rein in the possible coal supply surplus, the Chinese government has embarked on a campaign to halt the construction of coal mines being built in violation of current government regulations. The government stated that coal mine project development had been overheated during the last three years, with investment growth averaging 40 percent per year.

According to official statistics, in 2005 China had 28,000 coal mines, over 2,000 of which are state-owned, with recovery rates averaging 45 percent of reserves. Townships and individuals own 26,000, with recovery rates ranging between 15 and 20 percent. During 2005 some 5,243 coal mines were shut down, due to unsafe conditions.

China will reduce the number of small coal mines to about 10,000 over the next five years, from more than 23,000 at the end of 2005. By the end of 2007, China will have shut down all coal mines with an annual production capacity of less than 30,000 tons. In 2005, the average annual production capacity of China’s small coal mines was about 28,000 tons.

China’s coal demand growth is expected to slow slightly in 2006 due to the government’s moves to moderate economic growth and encourage conservation. According to Ou Xinqian, vice chairman of China’s National Development and Reform Commission, China’s coal demand is expected to reach 2.25 billion tons this year. Of the total demand, 2.17 billion tons will be for domestic use, including 1.21 billion tons for power generation. In addition, China has allocated 80 million tons of coal for export.

Coal Fuels China's Miracle

While China hopes to cut the rate of demand growth for other fuels, demand for coal is expected to grow by an average 7 percent annually. Much of the growth will be for power generation, which will consume 1.5 billion metric tons annually by 2010, up from 1.1 billion tons in 2005. While the government likes to tout its investments in hydropower and nuclear, coal is cheap and China has huge reserves. Those reserves, combined with low mining costs, mean that China can use coal for its power plants. And coal plants are cheaper than other forms of power. Building a coal plant in China costs about 5,000 yuan ($625) per kilowatt, while a hydropower plant costs 7,000 yuan ($875) and wind power is about 10,000 yuan ($1,250).

The ugly side of the story is that the higher use of coal for power generation will adversely affect an already damaged environment. The pollution from the coal plants is causing an estimated 400,000 premature deaths per year. According to one estimate by the central government, sulfur dioxide emissions are expected to reach 30 million tons by 2020, almost double the government’s own limit of 15.2 million tons. And those emissions cause acid rain, which poisons lakes, forests, and farmland.

The small coal mines, with capacities ranging from 10,000 to 30,000 tons a year, have become the main culprits of huge resource waste, the major source of pollution, and the primary cause of rampant accidents with large casualties and losses. While small coal mines produce only 30 percent of China’s coal, accidents in these mines account for two-thirds of China’s total mine-accident fatalities.

The government policy on small coal mines has been consistent over the last five years. The policy, which consists of four words – Shut, Suspend, Merge, and Diversify – has been met with strong resistance at local levels because of conflicting interests between the local and central governments. However, the central government is getting tougher on local authorities, demanding that they go strictly by the book. In China’s top coal-producing province of Shanxi, local authorities have embarked on a major program to reorganize its coal industry, aiming to merge the operations of coal mines with a capacity less than 90,000 tons per year. The policy guiding the coal-industry’s development will focus on closing small coal mines, merging medium ones, and building larger ones. The small and medium mines in Shanxi will be closed to improve safety, while the big ones will be encouraged to merge.

China's Top Ten Coal Producers in 2005

As the government closes smaller mines, it has approved plans to reorganize 98 existing mines and transform them into 13 major coal production bases to optimize the operation of the coal industry.

The 13 bases are located in 14 provinces and regions in northwestern, southwestern, northern, and central China. Their coal mines cover 103,400 square kilometers and have total coal reserves of 690.8 billion metric tons, accounting for 70 percent of China’s total. The government plans to produce 1.7 billion tons of coal from the 13 bases by 2010, a target that will then account for 69 percent of China’s total coal production of 2.45 billion tons.

The bases are located in Shendong province, in the Mengnan Plateau of Northern Shaanxi province, Northern Shanxi, Huanglong in Shaanxi, Central Shanxi, Eastern Shanxi, Western Shandong, Huaibei and Huainan in Anhui, Central Hebei, Henan, Yunnan and Guizhou, Mengdong in Northeastern China, and Dongning in Ningxia Autonomous region.

Of these 13 bases, the Shendong, Northern Shanxi, Central Shanxi, Eastern Shanxi, and Northern Shaanxi are meant to supply coal to eastern China, northern China, and northeastern China for power plants that will provide electricity for the east that is produced in the west.

The Central Hebei, Henan, Western Shandong, and Huainan and Huaibei will supply coal to the mid-eastern region, Beijing, Tianjin, mid-south, and eastern China, while the Mengdong base will supply it to three provinces in the northeast and Inner Mongolia. The Yunnan and Guizhou base is slated to supply coal to southwestern and mid-south regions, while Huanglong and Ningdong bases will supply it to northwest, east, and mid-central regions.

The position of the coal industry has thus underpinned China’s massive and meteoric economic rise over the last 25 years and will continue to do so for many years ahead. Without coal, China’s industries would literally grind to a halt.

Coal Production Tables

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