China's 2005 Coal Ordering Conference kicked off yesterday, aiming to secure the coal supply to power plants for the coming year.

Tough negotiations between coal and power companies over coal prices is expected during the week-long conference. Coal companies have demanded a hefty price hike, but power companies refuse to budge.

DThe power plants argue that they cannot pass on the fuel cost rise because the government controls electricity prices.

To solve the dispute, the government announced a pricing linkage plan last week. The plan allows power prices to float in line with the change in coal prices.

Xu Dingming, director of the Energy Bureau of the National Development and Reform Commission, said yesterday in Beijing that the government will implement the pricing linkage mechanism soon after the coal ordering conference.

Coal pricing has been a heated issue between electric power generators and coal producers, because the rising coal price has shrunk power generators' profits on the basis of a government-fixed electricity price.

The new coal and power price mechanism will result in an electricity price hike, experts say, and will pass fuel cost rises onto end users, alleviating the cost of power generation companies.

But problems still remain, as insufficient transportation still bottlenecks the country's coal supply. "Together with other factors including the growing coal supply demand in electric power generation, and recent coal mine accidents that could reduce coal production, it is possible that 2005 will see further coal price increases," a coal industry analyst with Beijing-based CITIC Securities told China Daily.

China's coal production is expected to top 2.05 billion tons in 2005, Han Yong from Shanghai-based China Securities said.

Han projected that coal production will meet the demand from coal consuming industries.

China's coal export quota was 80 million tons for 2005, the same as in 2004, Han said.

The one-week conference will gather the industry's upper echelon in coal production, consumption, export and transportation, to fix the coal price for 2005.

Coal consuming industries involved in the conference include electric power generation, steel production, fertilizer production, and resident utilization, an official from China Coal and Coke Holdings Ltd told China Daily.

(China Daily December 30, 2004)