Chinas coal prices to rise in 2008 ¨C MLR

Chinese coal prices are expected to rise next year as a result of supply pressures, the Ministry of Land and Resources said in a report published on its website.

It did not give an estimated figure for the price of coal in 2008.

Citing research by the China Coal Distribution and Marketing Association, the Ministry said that in order to curb overheating in the industry, the approval of new coal mining projects has been severely restricted.

The Ministry issued a notice in February suspending all new applications for mining licenses throughout the country.

A campaign to close down small and unlicensed mines has also had a significant effect on supplies, the Ministry said.

Although the government's 'macroeconomic control' measures are likely to cut coal demand from other industries, the state will introduce measures aimed at increasing the collection of resource taxes, which will also put pressure on the price of coal.

By the end of 2010, there will be a national coal shortage of around 100 mln tons, the report said.

A report released earlier this month by Credit Suisse predicted that China would become a net coal importer by 2010, with output increases by state-owned miners unable to keep up with increasing demand.

Transportation problems, as well as increased capital expenditure costs, would also keep the domestic price of coal at a relatively high level over the next few years, Credit Suisse said.