China says coal sector faces overcapacity problems

BEIJING, Apr 29 (Reuters) China's top economic agency on Saturday ordered a clampdown on new coal mines to stem a looming production glut it said threatened the long-term viability of the industry.

The National Develpment and Reform Commission said China's coal sector was threatened by excessive investment and ballooning over-capacity.

''Problems accumulated over a long time with structural irrationalities, low-level technology, frequent accidents, serious waste of resources and tardiness in treating environmental pollution remain very serious,'' it said.

An unnamed commission official said coal mines being built in violation of regulations should stop immediately, the official Xinhua News Agency also reported on Saturday.

The commission warned that looming overcapacity may weaken coal prices, and it said mines that remain in operation must become larger and more efficient.

By 2010, Chinese coal production must be capped at 2.45 billion tonnes a year, and 75 percent of that coal must come from medium-sized and large mines.

Late last year, the NDRC said it expected Chinese coal production to rise 4.9 percent in 2006 to 2.08 billion tonnes.

China currently has about 24,000 mines with annual capacity of between 10,000 and 30,000 tonnes, accounting for 70 percent of its coal production.

China, the world's top producer and consumer of coal, relies on coal for around 70 percent of its energy.

REUTERS PV HT1205