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The slow increase in domestic coal demand in the first half of this year has resulted in excessive coal supply and a drop in the coal price in some regions, the National Development and Reform Commission (NDRC), the country's industry watchdog, said on Thursday.

 

According to a report released by the NDRC, China produced a total of 995 million tons of coal in the first half year, an increase of 8.3 percent from the previous year, with 970 million tons sold, up 4.4 percent.

 

The country's coal storage has increased in recent months with the total storage climbing to 153 million tons by the end of June, 9.4 percent more than at the beginning of the year, taking it to its highest level since 2003, said the NDRC.

 

"The main problem for the country's coal market is the gap developing between a slow rise in demand and a marked acceleration in supply," said an official with the bureau of economic operation under the NDRC.

 

The official said under the tight macro-control policies of the central government, the rapid growth in some high energy-consumption industries has slowed, resulting in a slower demand rate.

 

In addition, the surging social investment in the coal industry may also bring more coal into the domestic market, as well as more coal imports in the first half year, said the NDRC official.

 

The NDRC predicts that though China's domestic coal demand may increase in the second half of this year, the growth rate will continue to decline.

 

The NDRC statistics said the growth rate of China's domestic coal demand began to drop last year, with the rate down to 8.5 percent from the double-figure growth in previous years.

 

The NDRC official warned that if investment in the coal industry can not be controlled effectively, the country will face worsening problems as supply begins to dwarf demand.

 

More macro-control policies targeting the coal industry will be set out in the second half of the year and the structural reforms have been quickened, said the NDRC official.

 

(Xinhua News Agency September 1, 2006)