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Coal imports into China increase to record levels in February

By Kishori Krishnan Exclusive to Cola Investing News ^[2]

China has discovered a new coal field containing more than 13 billion tonnes of proven coal reserves in the northwestern region of  Xinjiang, the China News Service reported on Monday. The 1,400 square-kilometre Sha'erhu coal field, located in the county of Shanshan in eastern Xinjiang, contains coal suitable for power generation and gas ^[3] conversion. Exploration began on the coal field in August last year, and the local prospecting bureau said that total reserves could eventually reach a total of 64 billion tonnes.  

Total estimated reserves in Shanshan County stand at around 240 billion tonnes, according to the China News Service. Shanshan aims to raise its total coal production capacity to 400 million tonnes per annum by 2020.  

Also in China, coal imports surged to the highest level in at least 22 months in February to 4.88 million tons, according to data released by the General Administration of Customs on Monday. That represents a 63 per cent increase compared to January, and a 73 per cent increase compared to February 2008. 

Analysts say that China, the world's biggest coal producer and consumer, increased imports of the fuel as power producers boosted overseas purchases on falling international coal prices and lower shipping costs. 

The coal price at Qinhuangdao port, a benchmark for China, stood at 557.5 yuan ($81.5US) a ton as of March 16, according to the China Coal Transportation and Distribution Association. The Qinhuangdao coal price has fallen from a July record of 995 yuan a ton. 

The disagreement between China's utilities companies and coal miners over this year's contract price for coal is another reason that local thermal power producers have had to purchase coal overseas. 

Wang Ling, analyst with Umetal.com ^[4], believes that coal imports will continue to increase in March and may drop beginning in April. "China's coal producers may suffer a loss due to increased overseas purchase by utility companies," said Han Xiaoping, an energy analyst with Beijing Falcon Pioneer Technology Co. 

Other analysts, however, believe that imported coal will not pose a threat to local coal, simply because no single coal producer has a production capacity large enough to satisfy China's rising demand. 

Out in the cold 

Xstrata Coal (LON:XTA) has revealed it could sack hundreds of Queenslander workers and bin a $5 billion project because of an emissions trading scheme (ETS). A written briefing to Opposition Leader Malcolm Turnbull has revealed the world's largest exporter of thermal coal could retrench 1,000 employees across Australia - with predictions half could be in Queensland - and sacrifice 4,000 future national jobs. 

The document, sporting Xstrata's logo - and seen by The Courier-Mail - revealed up to four mines across Australia could close and up to $7 billion in investment could be lost under an ETS. It did not reveal how many of the 1,000 jobs would be lost at Queensland mines but had the state's $5 billion Wandoan Coal Project, in the Surat Basin, is said to be on the chopping block. 

It is estimated that the Wandoan project would have created 1,300 jobs in its construction phase, with an operational staff of 840. 

The revelation came after Xstrata - which declined to comment when contacted by The Courier-Mail - laid off 150 workers in January at its Handlebar Hill lead ^[5] and zinc ^[6] mine near Mount Isa. In December it shed 230 workers at its Oaky Creek No.1 mine at Tieri, in central Queensland. 

The proposed closures are bad news for the Bligh Government, which is facing falling mining royalties and has been developing Wandoan with Xstrata. A new railway line has been proposed to link the mine to the Port of Gladstone. The project has a "mine life" of more than 30 years, producing thermal coal for export.

Company news

The Tata Power Company ^[7] has decided not to sell stake in two Indonesian coal mines owned by PT Bumi Resources. Tata Power holds 30 per cent stake in each company - PT Kaltim Prima Coal and PT Arutmin Indonesia, owned by Jakarta-based PT Bumi Resources Tbk. This acquisition is a key part of the company`s growth strategy and the company has no intention to sell its stake in the coal mines to Bumi Resources, the company said in a statement. 

Donald Benson, chairman and Chief Executive Officer of Nordic Oil and Gas Ltd. (CVE:NOG)  has announced that its board of directors has approved the granting of 1,225,000 stock options to directors and officers of the company, along with selected consultants and employees. The options, which are effective immediately, are priced at $0.07 per share, will run for a period of five years. Nordic Oil and Gas Ltd. is a junior oil ^[8] and gas ^[3] company engaged in the exploration and development of oil, natural gas and Coal Bed Methane in Alberta and Saskatchewan.