coal

Chinas coal industry keeps a good running in 2006 with profits from January to October increased by 17.6％ over the same period of last year. However, some uncertain factors still exist: (1) the growth rate of cost exceeds that of coal price, the industrial gross profit margin from January to October of 2006 decreased by 2.6％ over the same period of 2005; (2) The increase rate of fixed assets investment is obviously higher than that of other industries, which warns potential risks of excessive production capacity. In the year of 2007, the relatively slower development of macro economy would probably lead to a slower growth rate of coal demand. Besides, as the rise of production cost of coal (RMB 40-RMB 50), the economic running of Chinas coal industry would also face big pressure from the rising of cost. However, Chinas current insufficient production capacity and related control policies could balance the supply and demand of coal effectively. It is forecast that the industry will run in a steady and favorable trend in the year of 2007.