3 Sep 2009 14:18

Shenhua to build 30 mln-ton coal reserve base

Shanghai. September 3. INTERFAX-CHINA - Shenhua Group Corp., China's largest coal producer, plans to build a coal reserve base with 30 million tons of storage capacity to keep the domestic coal market stable during times of extreme shortage, state media reported on Sept. 3.

Shenhua is currently seeking a location for the base, which is still in the design phase, Shanghai Securities News reported. The company intends to build the base near China's key power consuming regions, probably somewhere in the eastern coastal region.

"The developed coastal region relies heavily on coal supplied from the western part of the country," Li Zhaolin, a senior coal industry consultant in Beijing, said. "This situation leaves the coastal provinces vulnerable to unexpected supply disruptions, such as the transportation problems that occurred during the blizzard of early 2008."

Li suggested that Shenhua might build the base in a coastal city that has convenient access to marine transportation, so that it can ship coal to other areas along the coast if railway transportation is temporarily interrupted.

However, Li warned of the potential high costs of managing a coal reserves base. "Coal is not suited for long-term storage. If you build a coal reserve base, you need to cycle the coal supply there every few months to prevent spontaneous combustion and the erosion of the quality of the coal. Managing coal stockpiles at the coal reserve base will not be an easy job," Li said.

Li said that these physical problems alone have led other coal industry experts to oppose the idea of setting up coal reserve bases as they would be too troublesome and costly.