The Shenfu-Dongsheng coalfield is located some 450km inland as the crow flies, straddling the border between Shaanxi Province and Inner Mongolia in northern China.
To date, Shenhua Group has transported Shenfu-Dongsheng coal destined for seaborne markets via two different rail routes to China’s major coal port, Qinhuangdao, located east of Beijing. The rail network to Qinhuangdao port is running at close to capacity. The new transport corridor is to cater for the planned rapid build-up in production from the Shenfu-Dongsheng project.
The new port, Huanghua, is being developed by Shenhua Huanghua Port Company Ltd (Shenhua Group 63%, Hebei Provincial Government37%) in Hebei province, some 140km south-east of Beijing.
The port project has an initial design capacity of 30 Mtpy of coal and comprises three berths catering for vessels up to Panamax (60,000t) size. The port will service shipments to the energy hungry southern provinces of China as well as to export markets.
Construction of the port’s onshore coal transportation system has been completed, and commissioning trials are now underway. On 8 October the 3 x 4,000 tph revolving tipper rail wagon un-loaders supplied by Krupp Fördertechnik were successfully load tested. The port has 3 x 6,000 tph shiploaders and trial ship loading will be carried out during November, with final commissioning of Phase 1 expected by the end of the year.
Four berths may be added later to allow the annual throughput to increase to 60 Mtpy. Huanghua will be the most modern and efficient coal handling port in China. The port will give priority to coal transportation, but will also transport other cargo.
The 815 km, 40 Mtpy, electric rail link from the mines to Huanghua port has also been essentially completed. The 269 km western portion of the link, from the mines at Shenmu to Shuozhou (the ShenShuo line) has been in operation since July 1996 as part of the second rail link to the port of Qinhuangdao. (The other route to Qinhuangdao is a northerly route through Inner Mongolia – a 172 km railway was constructed to connect the mining complex with pre-existing railways to the north.
This line, the Baotou - Shenmu line (or BaoShen) was put into service in 1989 and has a capacity of 10 Mtpy.)
The new 588 km section of the rail link to the new port is called the Shuozhou to Huanghua line (or the ShuoHuang line), although it actually joins the pre-existing Shenshuo line at Shenchi, some 50 km southwest of Shuozhou.
The next phase of Shenhua project, to be commissioned prior to 2005, will see overall coal production and distribution capacity reach 60 Mtpy. But the growth rate of Shenhua’s coal exports is expected to slow as the company’s domestic coal consuming projects take an increasing slice of output. This phase includes plans for a 2.5 Mt capacity coal liquefaction plant and the construction of further power stations that will take generating capacity from majority ownership of Shenhua plants to 10 GW. As mentioned previously, the handling capacity of Huanghua port is supposed to be expanded to 60 Mtpy during this phase – although it is hard to see the need for this anytime soon given that exports are only slated to increase to 25 Mt over the medium term. If the electricity generation and liquefaction projects proceed as planned there would also appear to be little coal left over for additional dispatches via Huanghua port to southern China.
Shenhua Group plans to further expand output by the year 2010, with coal production capacity boosted to 80 to 100 Mtpy, coal liquefaction feed capacity to 10 – 15 Mtpy, and output capacity of majority owned power stations to 15 GW.
The new rail and port link will not only enable Shenhua Group to increase exports but will also reduce costs. Last year Shenhua Group reportedly paid on average 170 renminbi (US$20.50) per tonne to rail coal to Qinhuangdao port, but this is expected to fall to around 130 renminbi (US$15.70) on the new route to Huanghua.
Shenhua Group’s on-site mining costs are reportedly only 44 renminbi (US$5.30) per tonne. Shenhua Group is planning a partial privatization next year by floating US$100m of stock on the Hong Kong exchange. The company will be renamed China Shenhua Energy Inc. Funds from the public listing will be used to develop four more coal mines at Shenfu-Dongsheng, as well as to double-track the Shenmu-Shuozhou line and implement the second phase expansion of the Huanghua coal terminal. The funds will also be used to build the second mine-mouth power plant and finance the planned coal liquefaction plant intended to process 14 Mt of coal into five Mt of oil each year.
Elsewhere, Yanzhou Coal is also beefing up rail capacity from its mines in Shandong Province to the port of Rizhao, with the double tracking of the Yanshi line scheduled for completion by the end of November.
The rail capacity constraints on China’s coal exports are therefore set to ease substantially by the end of the year – a scary thought given recent meteoric export growth rates. Competitors in Indonesia, Australia and elsewhere will just have to hope that a combination of the higher recent domestic coal prices and weakening export prices will slow China’s coal exports over the short to medium term. Over the longer term, high growth rates in domestic coal demand will soak up a lot of new production. China’s coal exports will be quite volatile over the long term, with small swings in the country’s supply-demand balance translating into relatively major changes to the level of exports.
