Coal output in China may drop 19 percent over the next sixteen years because investment in mines is falling, an official of the China National Coal Association predicted yesterday.

　　And with demand threatening to outstrip supply, the country needs to set up a centralized monitoring system to improve price-setting mechanisms for the fuel, said association officials attending a coal conference in Beijing.

　　The nation's coal production may slide to 1.36 billion metric tons by 2020 from 1.67 billion tons last year, Pu Hongjiu, vice president of the association, told the conference. "The coal industry lacks mega-sized companies that can invest heavily in new mines to maintain production," Pu said. "Demand growth will outstrip supply without new mines."

　　Coal prices have jumped this year because increased output at China's mines has failed to keep up with surging demand. China's economy, which relies on coal for 67 percent of its power needs, grew at an annual rate of 9.5 percent in the first nine months, lifting purchases by power plants and causing transport bottlenecks that disrupted supplies.

　　National coal production rose 19 percent between January 1 and November 21 to 1.7 billion tons, according to association figures. Full-year output may reach 1.9 billion tons, the group forecast.

　　China may import more coal from Vietnam next year to meet demand at power plants in southern provinces and buy from Mongolia to supply companies in the north, Dong Yan, director at the transportation research institute of the National Development and Reform Commission, said at the conference. The expected import volumes were not disclosed.

　　The country may face a shortage of 80 million tons of coal next year because demand may outstrip supply, Xinhua news agency said on November 18, citing Wu Chengmeng, vice chairman of the China Coal Transportation and Marketing Association.

　　China must work to set up an oversight unit to monitor coal prices nationwide and improve transparency, officials said at the conference.

　　The association, which represents 925 coal suppliers in China, plans to forward a proposal for the new unit to the National Development and Reform Commission, said Pu.

　　The commission is China's top planning ministry.

　　China has no benchmark indicator for coal because final prices are subject to negotiation between buyers such as power producers or steel plants and suppliers on varying requirements for product mix.

　　According to the association, leading state mines sold coal to power plants at an average price of 155.59 yuan (US$18.8) at the end of September, or nearly 43 yuan less than in market-based deals, Xinhua news agency reported.

　　"Coal is an important industry for China's economy," Pu said. "We need a well-regulated, collective pricing structure for the market to follow."

　　Higher prices this year trimmed profits at Chinese power producers including Huaneng Power International Inc, the country's largest listed coal-fired generator.

　　China's coal and power producers will "soon" hold their annual meeting to negotiate contract prices and supply for 2005, Pu said.

　　(Bloomberg News)