Local government leaders from Qinghuangdao are lobbying the central government to build a national coal trading center in this coastal city in north China's Hebei Province.

They hope this will turn the city into the key location for shipping coal from northern China to the south.

A Qinghuangdao government delegation went to Beijing last week to seek support from the National Development Reform Commission, China's top economic planning body.

"We had a little chat," said one member of the delegation. "No conclusion has been made so far."

Emphasizing the plan is in its infancy, the official said the establishment of the proposed national coal trading centre depends on the central government's support.

"We are just doing some research, trying to shift the function of the existing regional coal trading centre in Qinghuangdao," said the official, who wished to remain anonymous.

NDRC officials were unavailable for comment.

China established several regional trading markets in Shanghai and Qinghuangdao in the early 1990s. But trading was sluggish, largely because the coal industry was controlled by the government at that time.

Qinghuangdao Coal Trading Center General Manager Li Xuegang said time is ripe to launch a national coal trading center because the coal market is almost liberalized.

The government has relinquished control over most coal products, with more private coal suppliers and customers in the market.

Only 25 per cent of the coal supplied to big companies in power and metallurgical industries still enjoys State-backed lower prices. But the government has just decided to float electricity rates in line with the coal price fluctuations, offering conditions in which a complete liberalization of the coal industry is possible, Li said.

Li said a coal center can provide a platform for suppliers to meet users, reflect market conditions, establish benchmark prices, save trading costs and prevent the violation of contracts.

Local officials said Qinghuangdao enjoys good conditions to become China's first national coal trading center.

Qinghuangdao is a major port for coal shipments from northern to southern China. It handled more than 130 million tons of coal in 2004, or 7 per cent of the country's total coal output, with its coal exports accounting for half of the national total.

But analysts said it will take a long time before such a national trading center is established.

A manager from a major coal trading firm said big power companies, accounting for half of the total coal consumption, are not interested in the idea.

China's five largest power companies have their own fuel purchasing operations which purchase fuel for all of their power plant.

They prefer to negotiate long-term coal contracts directly with coal suppliers in order to get the lowest possible price.

(China Daily January 26, 2005)