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The Chinese Coal Ming Equipment Market Presents Great Opportunities



Coal Mining Equipment

Overview

Coal is the most dominant energy source in China, making up about 70% of total primary
energy consumption in the country. China's coal-producing area exceeds 550,000 square
kilometers. It has potential coal reserves of around 5.57 trillion tons. China is the world's
largest coal producer, accounting for nearly 28% of the world's annual production. In
2005, China's coal production reached 2.1 billion tons, an 8% increase. The percentages
of central government-managed coal mines, provincial government-managed coal mines,
and township coal mines are 48%, 14% and 38% respectively. With the ease of power
shortages in 2006, experts predict that China's under supply of coal will be eased as well.
Coal production will surpass 2.2 billion tons in 2006, and the export quota will be 80
million tons.

Generally speaking, the China's domestic coal mining equipment occupies a dominant
(90%) position in China market. With the rapid development of coal mining technology
in China, several Chinese companies have been able to manufacture high-tech mining
equipment, such as super-power electric haulage shearers, hydraulic support systems, and
armored face conveyers. Nevertheless, China's major coal mining equipment is
generally 10 to 15 years behind that of other countries with respect to mining efficiency,
equipment quality, environmental protection of mines, and safety. Thus, U.S. coal
mining equipment manufacturers and coal mine investors face long-term opportunities in
China's coal industry, particularly with China's large coal firms.

Best Prospects/Services

U.S. companies enjoy the greatest competitive advantage in supplying heavy coal mining
machines and systems. For underground mining operations, U.S. firms compete well in
the following categories: longwall shearers, stageloaders, continuous miners, batch
haulage vehicles, road headers, hydraulic roof support systems, and armored face
conveyors. For open-pit mining operations, U.S. firms compete well in the following
categories: electric mining shovels, walking draglines, blast hole drills, and heavy mining
trucks.

Coalmine safety remains a critical issue at Chinese coalmines. Accidents in 2005 killed
over 6,000 coal workers. Chinese government is trying to close 4,000 small coalmines
without sufficient protection on coalmine safe production. Only 35% of China's more
than 25,000 coal mines have safety equipment. According to the State Administration of
Coal Mine Safety Supervision, China will invest USD 6 billion over the next few years
for safety equipment in its large, state-owned coal mines. Of this investment, the central
government will contribute $605 million and coal companies will cover the rest. This
investment will create significant opportunities for foreign companies to export safety
equipment to China. Best prospects include: coal mining safety equipment, security
equipment, gas control systems, and fire monitoring and control equipment.

Opportunities

Due to the nationwide shortage of electricity, China will continue heavy investment in
coal production for many years to come. Experts predict China will need to invest over
$151 billion in coal infrastructure by 2020. The investment will cover the following
areas:
* Construction of new coal mines and coal bases
* Improvement of coal mine safety
* Clean coal processing technology
* Coal conversion technology (including coal liquefaction and coal gasification)
* Coal bed methane development and utilization

In order to improve coalmine management and increase coal production, the Chinese
government has established new policies to encourage foreign investment in the
coalmining sector. This shift in policy has included granting rights for the mineral
geological exploitation of domestic coalmines to foreign companies.




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