Ports and coal transfer: Hug of China's energy supply policy

Energy Policy 1994 22 (7) 609-622

Ports and coal transfer

Hub of China's energy supply policy

Daniel Todd and Zhang Lei

Coal is the prime energy source in China and, ac- cordingly, its movement greatly influences infrastructure development there. Fundamental to this development is the coordination of interlocking transport modes. Because energy producing and consuming regions are geographically distinct, coal movement rests on the adequate provision of railways and coastal shipping. Hitherto that provision has been lacking, and the country has paid a high price in consequence. Recently, large-scale infrastructure programmes have been initiated to remedy this situation. Ports and their attendant railway connections in northern China are central to these efforts, as the paper explains.

Keywords: Coal; China; Energy supply

While it is true to say that effective energy supply is im- possible without ample investment in resource extraction and processing, it is equally valid to maintain that adequate provision of infrastructure, especially transport infrastructure, is also indispensable. Since prime energy sources such as coal and oil are bulky commodities of low value to weight ratios, the infrastructure consistent with energy transfer - characteristically pipelines, railways and ports - impos- es heavy demands both on investment capital and lead times for installation. Nowhere is this more apparent than China, where coal transfer is deemed of vital con- cern since it is the predominant national energy source in the first place, and the cause of serious regional imbalances in energy production and consumption in the second. Because of historical reasons the producing regions, located overwhelmingly in the interior provinces, have lagged behind in terms of economic development whereas, in contrast, the consuming regions, concentrated

The authors are with the Department of Geography, University of Manitoba, Winnipeg, Canada R3T 2N2

in the coastal provinces, have shot ahead by securing most of the country's growth opportunities. The Chinese government, in consequence, has been caught in some- thing of a dilemma: on the one hand it wishes to correct the interregional disparity by favouring the development of the interior at the expense of the coast; on the other it is reluctant to jeopardize the growth impetus of the coast because the well being of the entire country rests on it. In the meantime, the serious interregional energy imbalance badly needs addressing. Finding itself with little room to manoeuvre, the government has decided to con- front the supply-demand mismatch by undertaking an enormous transport infrastructure programme. Not only will the new railways, ports and coastal shipping links eliminate the shortages prevailing in the consuming regions, but their very existence will stimulate the less-favoured regions which host them. I Thanks to their ability to handle all manner of goods besides coal, railways and ports promise to unlock the door to industrial development in these regions. 2 Boosted coal production from new, efficient mines together with cost-effective coal transfer should go a long way towards converting the dream of national energy self-sufficiency into a distinct possibility, to say nothing of achieving the goal of reducing foreign currency outgoings for imports into the energy starved coastal regions. The incidence of coal deposits dictates that the interior part of northern China will be the chief recipient of massive investment in new mining capacity. It also means that the adjoining regions through which the transport links run will also be earmarked for much investment.

This paper traces the events leading up to the initiation of the major infrastructural undertaking before describing its ingredients. Beginning with the coal industry itself, the paper endorses the importance of coal in China's energy supply and stresses the problems that arise from its uneven distribution. Given the scale of the interregional supply-demand mismatch, the paper then examines the various transport options that have been considered to alleviate it. Ports are singled out as being

0301-4215/94/07 0609-14 © 1994 B utterworth Heineman Ltd 609

China's energy supply policy: D Todd and Z Lei

Table 1. Regional coal production and consumption, 1990.

Region

North Beijing Tianjin Hebei Shanxi Nei Mong.

North-east Liaoning Jilin Heilong

East Shanghai Jiansu Zhejian Anhui Fujian Jianxi Shandong

South Henan Hubei Hunan Guangdong Guangxi Hainan

South-west Sichuan Guizhou Yunan Xizang

North-west Shaanxi Gansu Qinghai Ningxia Xingjian

Total

Coal Production Consumption tMt) (%) (Mt) (%)

406.1 37.6 236.9 22.4 10.1 0.9 24.1 2.3 - - 17.9 1.7

62.4 5.8 78.8 7.5 286.0 26.5 76.6 7.3

47.6 4.4 39.5 3.8

159.7 14.8 187.8 17.8 51.0 4.7 82.5 7.8 26.1 2.4 40. l 3.8 82.6 7.7 65.2 6.2

147.0 13.6 257.1 24.4 - 27.4 2.6

24.1 2.2 62.2 5.9 1.4 0. I 24.9 2.4

31.2 3.0 34.3 3.2 9.5 0.9 13.1 1.2

20.3 1.9 22.7 2.1 60.(I 5.6 72.6 6.9

152.5 14.1 180.2 17.1 90.8 8.4 61.0 5.8

9.2 (1.9 33.4 3.2 33.7 3.1 39.6 3.8

8.9 0.8 29.9 2.8 9.8 0.9 15.6 1.5 - 0.7 0.1

127.l 11.8 115.5 11t.9 67.9 6.3 66.5 6.3 37.0 3.4 27.1 2.6 22.3 2.1 21.9 2.1

87.5 8.1 77.8 7.4 33.3 3.1 27.3 2.6 15.6 1.5 18.6 1.8 3.2 0.3 4.7 0.5

14.4 1.3 8.9 0.8 21.0 1.9 18.4 1.7

1079.9 100.0 1055.2 100.0

Balance I%)

+15.2 1.4

-1.7 -1.7

+19.2 +0.6

-3.0 -3.1 -1.4 +1.5

-10.8 -2.6 -3.7 -2.3 -0.2 -0.3 -0.2 -1.4

-0.3 +2.6 -2.3 -0.7 -2.0 -0.6 -0.1

+0.9 0.0

+0.8 0.0

+0.7 +0.5 -0.3 -0.2 +0.5 +0.2

0.0

Source: Statistical Yearbook of China 1991.

absolutely critical to the implementation of any viable solution to the problem of coal transfer. This brings the focus of attention to, first, the chosen centre of coal production in Shanxi and, second, the intermodal system for transporting the coal to coastal markets mentioned above. In conclusion, the paper assesses the prospects of these initiatives in the light of China's ever increasing demand for energy and its persistent regional disparities in development.

T h e k e y r o l e o f c o a l in C h i n a

The predicament confronting Chinese energy planners can be concisely described in two statements. The country is inordinately reliant on coal (responsible for 70% plus of energy supply in comparison with the 21% plus

accounted for by oil), and most of this energy supply is found in places far from those that consume it. Eight provinces in South and East China together contribute 40% of national output and share almost the same proportion of the national population; but their proven coal reserves amount to barely 2% of the national total) Unsurprisingly, therefore, regional imbalances between coal supply and demand adopt alarming proportions in China. As Table 1 attests, this imbalance is particularly acute in the East, but appreciable shortfalls occur in parts of the North-east and South as well. Significant coal surpluses crop up in the North, transforming this region into the principal supply source for the rest of the country. Most of the North's advantage is conferred on it by Shanxi, an interior province which can lay claim to being the heart of China's coal industry. This dominant

6 1 0 Energy Policy 1994 Volume 22 Number 7


Table 2. Distribution of major coal mines.

Region Total capacity Mines of 10 million t (and % of nation) capacity or more

North 366.1 (42.0) Datong 30.8 Kailuan 16.7 Yangquan 13.9 Xishan 11.8 Fengfeng 11.3

Central-South 156.4 (17.9) Pindingshan 16.0

North-east 131.5 (15.0)

South-west 95.4 (10.9)

North-west 70.4 (8.2)

Hegang 14.3 Jixi 13.0 Fuxing 11.5

East 52.5 (6.0) Huaibei 14.4 Xuzhou 12.8

5-10 million t 2-5 million t

Liuan 6.8 Xinwei 6.7 Zaozhuang 6.6 Fenxi 6.2 Jincheng 6.1 Jingxi 6.0 Nianzhou 5.2 Pingzhang 5.0 Hangdan 5.0

Yima 8.3

Fushun 8.2 Shangyashan 6.7

Liuponshui 7.2

Tongchuan 7.1 Shitanjing 5.9

Huainan 9.2

Zibao 4.4 Wuda 4.3 Zalanuer 3.8 Feicheng 3. I Xintac 2.8 Huoxian 2.5 Baohaiwan 2.0

Hebi 4.9 Jiaozuo 4.4 Xinmi 4.0 Pingxiang 3.4 Fangcheng 2./)

Shengyang 5.0 Qitaihe 4.8 Tiefa 4.6 Tonghua 4.0 Liaoyuan 3.5 Shulan 3.4 Beipiao 2.4

Dukou 3.4 Sangzao 2.4 Nantong 2.4 Furon 2.2 Guangwan 2.1

Huangcheng 3.4 Shizuishang 3. I Yaojie 2.9 Jingyang 2.3 Urunqi 2.2

Datun 2.9

Source: Abstracted from Li Wen-Yan, ed, China's Industrial Geography, Science Press, Beijing 1990.

position taken by Shanxi is a product of government policy followed after 1949.

Set apart for special attention after the Communist take over, the coal industry grew inexorably, achieving a production figure of 1080 million tonnes (Mt) in 1990, the largest national output in the world. Much of the stimulus for growth, of course, came from the priority given to heavy industry. 4 Bolstering of the steel sector during the First Five-Year Plan (1953-57) was especially conducive to expanded mining capacity in the traditional producing areas of Liaoning, Hebei and Shandong, the coalfields closest to coastal markets. Nevertheless, Shanxi received some investment at this time, as did coalfields in the Central and South-west regions. From the 1960s, however, the onus shifted to extraction from smaller mining operations, leaving the larger mines starved of investment. At the same time, emphasis shifted to the South-west region, with Guizhou (Liupenshui) and Sichuan (Baoding) being singled out

for development. Mindful of the opportunity cost of this programme - output forgone from mines capable of achieving economies of scale - the planners called a halt to the sally into dispersed, low investment coal mining in the late 1970s. Thereafter, attention swung back to the North and Central regions, reverting with renewed vigour to the development of large, fully mechanized facilities. Unsurprisingly, then, these areas boast the major mines, including the giant Datong site complete with a capacity of over 30 Mt (Table 2). 5 As the beneficiary of large investments, Shanxi is the leading coal producer, accounting for 286 Mt in 1990 or about one-quarter of China's output. Indeed, fully two-thirds of China's 643 000 Mt coal reserves are concentrated in the North and no less than half of these are located in Shanxi. The North-west region, next best endowed, comes a distant second with 12% of the national coal reserves. Significantly, the 13 provinces composing the South and East, the two most populous regions, have been sparingly

Energy Policy 1994 Volume 22 Number 7 611


J

(.. (

/.

18.4 20.2

XINJIANG

\

,,... \

INNER MONGGOL

O L 4.7 3 . 2 ~ • QINGHAI

~'~ '~ '%~ XIZANG 66.5 67,9

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D Coal consumption ] (million tonnes) ,,,j

r 21.9 22.3

I c°a' pr°'uc"°° " (million tonnes) "~

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Figure 1. Coal production and consumption by region, 1990.

286.

76.6

C7

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76.2

HEILONGJIA~G J 40.2 / ' J

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0 300 600 M i t d L I I t I t I i i I I r ~ t

0 300 600 900 KM

bequeathed, holding title between them to just 14% of the total.

Supply-demand mismatch

Prodigious growth in output, commensurate with investment in heavy industry, had affirmed the regional imbalance between coal supply and demand which has already been mentioned (Figure 1). A simple ratio in which coal production is divided by coal consumption for a given province suffices to provide a measure of regional coal self-supply. Manipulation of that ratio permits the calculation of net coal inflows. In 1990 there were 19 provinces which fell into the category of net coal importer. Jiangsu and Liaoning were by far the largest, with net import requirements that amounted to 38 Mt and 31 Mt respectively. The addition of Shanghai, Hubei, Zhejian, Guangdong, Tianjin, Hebei, Beijing, Jilin and Jianxi, each demanding imports in the 10-30 Mt range, accounted for more than 160 Mt or over 60% of total regional coal imports. Reorganized along the lines of coastal interior regions, the ratios can

be used to elicit two findings: first, that the interior displays higher coal self-sufficiency than the coast and, second, that the import dependency of the coast has been rising steadily since the mid-1970s in tandem with the adoption of the outward oriented, 'open door' policy, effectively instituted in 1979 with the inception of the special economic zones. In more detail, the most de- pendent area, Shanghai-Jiangsu-Zhejiang, relies on other regions to overcome its net shortfall of 89 Mt as a corollary of its self-supply ratio of only 0.32 Mt. Beijing-Tianjin-Hebei was in a more fortunate position in 1990, thanks to a 0.60 ratio, and called for 48.3 Mt of net imports. Nevertheless, coal consumption in the pre- vious 10 years had nearly doubled in this coastal belt around the capital, a rate markedly superior to the 5% recorded by the interior (and only marginally deficient in self-supply) Sichuan-Yunnan area. Recourse to the ratio permits us to identify net coal exporters as well. Only nine provinces emerge in this category, led by Shanxi. Its net coal exports reached 209 Mt in 1990, a level far in excess of the second largest exporter, Henan,

612 Energy Policy 1994 Volume 22 Number 7

which registered nearly 30 Mt. The third largest exporter, Heilongjiang, recorded net exports of 17.4 Mt. Five others - Guizhou, Inner Mongolia (Nei Monggol), Shaanxi, Ninxia and Xinjiang - achieved export levels of less than 10 Mt. Clearly, the implementation of an effective distribution system to even out the spatial mismatch in coal supply and demand is absolutely imperative and the key to that system is transport infrastructure.

Coa l t ranspor t op t ions

The symbiotic relationship between coal and transport is expressed in three ways: structure of freight flows, transport intensity and transport distance and modal choice. With respect to the first, a unique feature of energy consumption in China is the high share of coal in both industrial and total consumption. In 1980, for example, coal accounted for about three-quarters of the former and half of the latter. In India, by contrast, the relevant shares were 54% and 32%. There arises, then, a patently obvious need to transport coal over even short distances in China; a fact explaining the mineral's 40% share of all tonnage moved on the transport system. Turning to the second point, China's economy appears highly intensive in freight transport usage. Expressed in tonne kilometres (tkm) of freight per dollar of GNP, it registered 3.17 in 1980, ie a level substantially higher than in the USA (1.87) or India (1.67). 6 Much of this discrepancy can be ascribed, in China's case, to the prevalence of long-distance coal movements (notwithstanding the point made above about the continuing need for short hauls). As for the third point, average transport distances in China increased from 159 km in 1949 to 270 km in 1990. Average coal transport distance, albeit of a different order of magnitude, mirrored the increase, rising at a rate of 2.9% per annum between 1975 and 1990 alone. By the end year, average coal transport distance hovered round the 2000 km mark. Since more than 50% of total coal output is hauled over the rails, this mode of transport is particularly important. Nevertheless, in spite of carrying some 609 Mt of coal in 1990, the railways were still unable to prevent 10 Mt or more from being lost each year to spontaneous combus- tion for lack of transport and, more critically, appeared incapable of satisfying soaring demand for coal shipments into the booming coastal regions on account of congested lines and shortages of rolling stock. Graphic testimony of the difficulties created by this situation is evident in Hunan province. The authorities there, frustrated by the inability of the transport system to deliver sufficient Chinese coal, have had recourse to import Australian coal, an expedient costly in terms of the allocation of scarce foreign currency reserves. Even the railway administration conceded the point that traffic capacity had reached the stage of 'satura- tion'. 7

China's energy supply polio3': D Todd and Z Lei

Figure 2 shows the main origins and destinations of coal flows whereas Figure 3 displays the complete coal handling transport infrastructure, adding ports dealing with collier shipping to a map of the rail system. Focusing on rail links first, the main north-south arterial lines are Zhengzhou-Wuhan and Xuzhou-Nanjing, each carrying more than 25 Mt of coal per year. From the standpoint of west to east transfer, the Datong- Qinhuangdao line is paramount, responsible for 40-50 Mt of coal in a year. Given such high densities of coal traffic in the north and the existence of bottlenecks, the northern rail network has been highlighted for special attention. Underlining this initiative is the central government's commitment to developing the North region as the supplier of coal for other regions. The rail effort has been complemented by improvements in the water borne mode. Alerted to the need to find an alternative to the hard pressed railways, the planners in the late 1970s found limited relief first in barge haulage on the inland waterways and second, and much more importantly, in coastal shipping) By 1985 coal cargoes amounted to 52% of all centrally controlled (ie Ministry of Communications) coastal shipping and 55% of all local- ly controlled shipping. This potential of coastal shipping to act as a useful complement to rail haulage could only be realized, however, with the removal of the problems long besetting the ports.

The ports

It was not until 1973 when Premier Chou En-lai person- ally drew attention to the problems of port inadequacy that serious measures were taken to remedy the situation. 9 Improvements initially were slow in coming. In 1979 alone, for example, it was estimated that costs incurred as a result of deficient port facilities amounted to US$100 million, l° Thereafter, though, changes were both striking and immediate. By 1990 cargoes carried on domestic waters, 80Mt, reached a level 16 fold greater than 1952. Moreover, the freight volume of inland and coastal shipping, 1159 Mtkm in 1990, was roughly 10% more than the railway's freight volume. In that same year, cargo handled at the 16 larger ports reached 432.3 Mr, a dramatic increase on the 191.8 million recorded for 1965. Shanghai, as China's gateway port, remained preeminent with 139.6 Mt or 29% of the total. Significantly, however, the three principal bulk handling ports - Qinhuangdao, Dalian and Qingdao - together accounted for another 149.3 Mt or about 30% of the total port throughput. This performance signalled some fundamental changes for the three northern ports, not least a boost in traffic share from the 28% arrogated by the trio in 1965. All in all, aggregate port traffic grew at a rate of 20.8% per year between 1978 and 1990



COAL FLOWS (Mr)

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China's et ergy supply policy." D Todd and Z Let

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Major rail lines for coal transport

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Planned rail line for coal transport

i ~. F- \ / , . . . j -.,,

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Figure 3. Coal transport and rail-port system in China, 1990.

and, correspondingly, the government commissioned 180 berths capable of handling ships over 10 000 dwt during the years 1973 to 1990. Table 3 summarizes the port situation obtaining at the beginning of the 1990s.

Coal ports

The major effort to modernize ports, coinciding in part with the adoption of the open door policy, has focused on two kinds of ports: the container handlers (Tianjin, Shanghai, Guangzhou and the new port of Huangpu) on the one hand and those dedicated to coal transfers on the other. In accord with the latter thrust, major coal terminals have been brought on stream at Qinhuangdao, Shijiusuo, Qingdao and Guangzhou while, for its part, Lianyungang has been endowed with smaller-scale facilities. Altogether, coal handling capacity had climbed to 65 Mt per year by 1985, considerably more than the 45 million then deemed acceptable by South Africa, one of the world's largest coal exporters. The bolstering of

capacity did not end there, surpassing 72 Mt by the beginning of the next decade. In respect of the individual ports, 1990 effective capacities were reported as: Qinhuangdao 51 Mt per annum Shijiusuo 15 Mt pa, Qingdao 3 Mt pa, and Lianyungang 3 Mt pa. A potential drawback encroaching on capacity usage can be gleaned from Table 4, however, and that concerns the reliance on relatively small berths. Most berths in the coal terminals are designed to accommodate handysize vessels, those in the 25 000 to 30 000 dwt size class. In fact, the coastal collier fleet is overwhelmingly made up of ships in the 16 000 to 20 000 dwt bracket, li While perfectly suited to fairly small consignments in shallow, coastal waters, these vessels forgo the economies of scale enjoyed by bigger vessels of 100 000 dwt and greater (the so-called Capesize ships). Larger berths were geared to Panamax vessels (50 000-70 000 dwt) and confined to Shijiusuo. The avoidance of Capesize berths was directly attributable to the severe costs

Energy Policy 1994 Volume 22 Number 7 6 1 5

China's energy supply policy." D Todd and Z Lei

Table 3. Major Chinese seaports.

Port Throughput Total berth (million t pa) length (m) 1965 1990

Dalian 10.6 49.5 14 192 Yingkou 0.3 2.4 2 448 Qinhuangdao 4.8 69.5 6 151 Tianjin 5.5 20.6 9 501 Yantai 1.0 6.7 3 324 Qingdao 4.5 30.3 7 500 Shijiusuo - 9.3 I 987 Lianyungang 2.7 11.4 3 837 Shanghai 31.9 139.6 21 437 Ningbo - 25.5 4 413 Shantou 1.8 2.8 1 264 Guangzhou 4.7 41.6 10 365 Zhanjiang 2.2 15.6 4 601 Haikou 0.6 2.9 1 442 Basuo 1.0 4.3 842 Sanya 0.3 0.3 715

Source: Statistical Yearbook of China 1991.

Total berths

75 22 35 57 24 40 13 23

215 45 15

118 31 13 5 7

Berths able to take I0 000 dwt vessels

28 5

22 32

9 16 5

14 64 10

22 17

3

Table 4. Port coal loading capacity by ship size, 1986.

Port Ship size (000 dwt) <20 20-35 36-60

Qinhuangdao 4 20 22 Qingdao 0 3 0 Shijiusuo 0 0 0 Lianyungang 10 7 0 Total capacity 14 30 22 Share (%) 17 37 27

60-99 >100

0 0 0 0

15 0 0

15 0 19 0

Source: Ministry of Communications.

entailed in dredging. Belatedly, attempts are being made to furnish berths compatible with the most cost-efficient vessels. In large measure this was at the gentle insistence of Japan, desirous both to acquire Chinese coal for its own markets and to transport it in large, efficient vessels. More to the point, the Japanese were prepared to finance upgraded coal terminalsJ 2 Shijiusuo, opened to foreign vessels in May 1986, was a major beneficiary, receiving two 100 000 dwt class berths. Qinhuangdao profited even more from the sanction given to coal exports and the augmented facilities required to effect them. Its original coal terminal, three berths of 50 000 dwt capacity and a fourth able to take 20 000 dwt vessels, connected with a coal handling throughput of 30 Mt pa, was supplemented during the Sixth Five-Year Plan (1981-85) with additions which bespoke another 30 Mt pa. Begun in 1984 the scheme envisaged a 100 000 dwt-class berth as well as two designed for handysize vessels. Conceived on a yet grander scale, the succeeding phase, destined for completion in 1994, will push up coal throughput to over

100 Mt pa. Complementing enlarged capacity at the port is the Datong-Qinhuangdao double-track electrified railway, expressly commissioned in 1989 to deliver Shanxi coal to the dockside (and further improvements to the line are in hand). Already by 1988, one-quarter of the port's 40 Mt pa of coal shipments was cleared for overseas markets, particularly Japan. The export incentive prompt- ed an upheaval in port practices; for example, the pre-1983 custom of using small railcars to bring the coal to the stockyard, laboriously transferring it by hand and shovelling to a storage area before manually loading it into a ship's hold, was jettisoned in favour of Japanese automated ship loaders capable of transferring coal to the ship directly from the railcars and bypassing the stockyard altogether. 13 These developments, entertained by the government to relieve bottlenecks in coal distribution, in- vite greater scrutiny of the infrastructure connecting the mines with the coast: a topic to which we now devote our attention.


The mine to port axis in North China

While about 37% of Shanxi province, some 57 0(30 km 2, sits above coalfields, the area abounds in all kinds of coal, including coal to generate electricity, coking coal for metallurgical purposes, anthracite for making chemical fertilizers and peat coal for domestic usage. An average kilogram of coal mined in the province yields 6000 kilocalories when burned, but coal from Datong mine (marked 4 on Figure 4), registering 7800 kilocalories, enjoys the best reputation. Shanxi coal gen- erally is low in ash, sulphur and phosphorus; indeed, the huge Shanghai Baoishan iron and steel complex has re-

China" s energy supply policy: D Todd and Z Lei

lied on coal extracted from Gujiao (marked 2 on Figure 4) since its inception. The coal seams are thick, display little faulting, and conform to a simple geological structure, all of which makes for cost-effective extraction. Average worker productivity in the Shanxi coalfield registered 2.53 t per day in 1990, a vast improvement on the 1.22 t per day applying nationally. In general costs in other regions are of the order of one-third to two times higher than those obtaining in Shanxi. 14 Even more enticing, Shanxi is strategically placed, just a mod- erate 400-600 km from both the Beijing-Tianjin market and the ports earmarked for onward shipment to coastal markets in the south.

Harbour

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[ ] Planned coal mine t' ~' '~ ~' ~ Railway

-P+ ++ ++ Rail lines under construction



Shanxi was not chosen to serve as China's prime coal production base until the early 1980s. This situation arose not through oversight but as a result of compelling circumstances. When an energy shortage of disturbing magnitude first became evident in the mid-1960s, the planners were confronted with a choice between con- centrating coal production in the north where costs were lowest or developing more expensive coal resources closer to consumption centres so as to reduce transport costs: investment was too scarce to accomplish both. In the event, the latter option initially gained favour. Yet persistent energy shortages necessitated a policy review, with the upshot that the former option took precedence. The Office for Planning the Energy Resources Base of Shanxi was founded in 1982 as an agency responsible for the overall development of the province and its con- tiguous areas of western Inner Mongolia, northern Shaanxi and western Henan. Its brief, quite simply, is to convert the area into the country's biggest coal source. To that end, it has conceived a string of objectives. At the forefront was the building of two new rail routes, the longer of the two is the 653 km long line mentioned above, which links Datong with Qinhuangdao. The shorter (308 km long) Yanzhou to Shijiusuo line offers a southern route out of the province. Both are dedicated to handling coal trains, the first, for instance, boasting a freight capacity of 100 Mt pa of coal. Second, three ex- isting rail lines were modernized: the Datong-Puzhou route running north-south through the province; the Changzhi-Jiaozuo route, also conforming to a north-south direction; and the Taiyuan-Shijiazhuang route, adopting an east-west bearing. Double-tracking and electrification were installed throughout. Third, a sizeable group of mines (numbered 1-12 on Figure 4) were either newly sunk or comprehensively revamped. Gujiao, for example, was implemented around a Y3.5

billion project to remove 16.5 Mt pa of coking coal. Pingshuo (designated 1) for its part, claims a designed capacity of 45 Mt pa and turns on three open-cast mines, one of which - Antaibo No 1 - holds the distinc- tion of being the largest mining joint venture project in China, commanding an investment of US$450 million. Finally, power plant capacity has been boosted, thereby transforming coal into usable energy at the disposal of nearby industrial customers; for, mindful of the conse- quences of overreliance on a depleting resource, the planners (especially those employed by the province) were resolved to introduce other productive activities into Shanxi. In combination, these measures will permit Shanxi to realize coal output in the region of 300-400 Mt pa by the year 2000; that is, meet one-third of the an- ticipated national requirement. At least 75% of the output is destined for markets outside the production zone. 15 With the rising tempo of output, the prospect of diverting increasing amounts of coal to foreign markets is attractive; not only does it boost China's export earnings but it helps pay for the port and rail infrastructure.

How cost competitive is this Shanxi sourced coal? The World Bank holds the view that it is decidedly competitive in coastal China notwithstanding haulage distances in excess of 1000 km. It owes this favourable outcome to a combination of benign conditions for exploitation and lower costs in capital construction, operation and maintenance than competing regions, to say nothing of better quality coal. Granted that Shanxi coal is deserving of exploitation in preference to other sources, can improvements be effected in the means whereby it is distributed throughout the country? Judging from the point made earlier that the rail system is already overburdened, any emphasis on railway haulage other than links to the ports seems misguided. On the face of it, an appraisal of the transport costs

Table 5. Indicative costs of coal transport by modes.

Mode

Rail

Route Distance(km) Cost(Y/t)

Datong -Beijing 300 6 -Qinhuangdao 658 12 -Shinyang 1000 20 -Wuhan 1500 30 -Guangzhou 2400 48

Taiyuan-Shanghai 1500 30 -Qingdao 900 10 -Wuhan 1200 24

Water (30 000 dwt bulker) Qinhuangdao-Shanghai (10 000 dwt minibulker) Qingdao--Shanghai (3000 dwt barge) Wuhan-Nanjing (1500 dwt barge) Zuzhou Nanjing

Road (25 tonne truck) Datong Beijing

1350 14 750 10 800 12 400 7

300 75

Source: World Bank, China: Long-Term Development Issues and Options, Washington DC, 1985.


structure corroborates this belief. In view of the fact that most rail lines carrying coal from northern China are op- erating to capacity, the appropriate transport cost to use as a basis of comparison with other modes is the long- run marginal cost, that is to say, variable cost plus a factor adjusted to reflect the opportunity cost of capital utilized in the building of new lines. The cost arrived at is governed by local conditions and topography, and so varies from place to place. The following cases convey a fair summary, however.

Transport costs incurred in the shipment of coal on a double-track railway over 1000 km can equal Y20 per tonne as opposed to the Y30 more usual on a single- track line (Table 5). Conversely, coastal shipping over the same distances can reduce the tariff to Y14. Rail is only competitive with water for relatively short distances (300 kin), although it remains vastly superior to the alternative of road haulage. Yet an important qualifi- er distorts these figures, which arises whenever modal transfers are encountered. The transhipment involved in switching from rail to ship and ship to rail as part and parcel of the supply of Shanxi coal to a southern interior city is instrumental in raising total transport costs to Y40--60 per tonne. Transport charges of this magnitude justify southern coal production despite pithead costs at least double those prevailing in Shanxi. In short, coal mining remote from Shanxi is still a viable proposition. But in order to uphold the decision to concentrate investment on Shanxi, the cost-effectiveness of coal movements must receive constant attention, a process insistent in pressing for minimum delays - and attendant costs - at transhipment points. In practical terms, this goal requires that a full range of facilities is secured for the leading transhipment point, Qinhuangdao.

While Qinhuangdao's assemblage of berth facilities has already been remarked on, it is necessary to give the

China's energy supply policy: D To&l and Z Lei

port some perspective. A mere fishing village and minor naval station for much of its existence, the harbour was connected by rail to Tianjin in 1893 and opened to foreign trade five years' later. In the following year, the owners of the Kaiping (Kailuan) coal mines saw fit to commit £100 000 to new harbour works; but actual moves towards making the site operational as a coal port progressed at a snail's pace. L6 A vital second rail link, the Beijing-Shenyang line, afforded new potential to what had become a languishing port. It received its first real shot in the arm in 1917 when the largely UK owned Kailuan Mining Administration, located in Tangshan, elected to use Qinhuangdao for coal shipments. Entirely limited to manual discharge, the port was further cir- cumscribed by shallow water approaches and rudimentary berths centred on two piers. Up to 1949, lor instance, coal handling capacity never exceeded 800 000 tonnes a year. Nevertheless, it became the only specialized coal port in China, forwarding more than a quarter of Kailuan's total production to coastal cities from Tianjin to Guangzhou. A small portion of the shipments constituted genuine exports, foreshadowing the Japanese interest of later years. Under the Communist regime, the port was renovated and by 1969 had had be- stowed on it two new coal berths. From 1973 it acquired an element of diversification, receiving an oil wharf. With the decision to nominate Shanxi as the leading coal producer, the port was set aside for wholesale expansion along the lines recorded above. This affirmed its standing as China's principal coal port, but, as Table 6 reveals, also consolidated its role as a significant han- dler of liquid bulks. It is, then, an energy resources port of the first rank, northern China's only ice free harbour. In 1988 Qinhuangdao's throughput equalled 58.1 Mt (some 31 times greater than its total for 1952), of which 18.7 Mt were categorized as foreign trade cargoes.

Table 6. Commodity throughput shares of Northern Chinese ports, 1985.

Commodity Port: Qinhuangdao Dalian Qingdao Tianjin Yantai Yinkou (%) 1991 (%) 1990 (%) {%) (%1 (%)

Coal 75.0 5.8 21.7 O. 1 13.5 0.2 Petroleum 17.0 51.8 39.7 2.2 0 0 Metallic ores 0.8 3.2 7.4 O. I ~') 0.6 Iron and steel products 0.3 3.0 7.2 28.4 4.0 13.0 Construction materials 0.2 0.2 4. I 7.2 30.4 0 Cement 0.2 1.4 (I.3 2.0 0.5 0 Nonmetallic ores 0.2 2. l 4.0 2.7 2.7 33.7 Timber 2.0 0.8 4.0 2.3 14+9 9.0 Fertilizer 0.8 2.3 2.5 3.0 11.9 3.4 Salt 0 0.8 1.0 11.4 0 1.0 Grain 1.9 13.3 2.4 12.7 6. I 33.0 Others 1.6 15.5 7.7 27.9 16.7 6.1 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Guao, Xiao-zheng, Study of the Relationship and Economic Development of the Port-City in Northern China, PhD thesis, Peking University 1988; and port authorities of Qinhuangdao and Dalian. • "



Unabated growth continued thereafter. By 1991 coal traffic alone had climbed to 54.3 Mt, accounting for 75% of the port's throughput. Moreover, as Figure 5 reveals, export cargoes registered by the port in that year had reached nearly 20 Mt, almost all of which were coal shipments. Thus Qinhuangdao is striving to match the demands placed on it by Shanxi coal suppliers; but, while the port has grown in stature in concert with the expansion of northern coal production, the enlarged output expected by the turn of the century is likely to stretch its capabilities to the full.

In anticipation of this possibility, the provincial planners in Hebei have championed the development of a new port, together with accompanying rail link, in an area to the south of Tianjin. Despite the drawback of shallow water approaches, such is the need for more port coal handling capacity that the site at Huanghua received formal central government approval in August 1993. Under the first construction phase, Y2.4 billion has been allocated for the provision of four berths able to take 35 000 dwt ships. At the same time, the construction of the Baotou-Huanghua line, some 1021 km

100

6O

g 50

~ 4O

0

1984 1985 1986 1987 1988 1989 1990 ~991

Figure 5. Qinhuangdao Port throughput.

long, received fresh impetus (Figure 3). The first stretch, a 171 km long line from Baotou in Inner Mongolia to Shemmu in Shaanxi province, was ready even prior to the official initiation of the port project; the second stretch, from Shemmu to Shuozhuo in Shanxi province, is now under construction. Upon completion in the year 2000, the Baotou-Huanghua railway will be capable of moving 100 Mt of coal from Inner Mongolia, Shaanxi and Shanxi to the port for onward shipment. Together, Huanghua and Qinhuangdao will by then be handling in excess of 200 Mt of coal; that is, about one-quarter of the total coal traffic volume of the country as a whole. Southern ports like Shanghai, Ningbo, Zhoushan,

Xiamen, Huangpu and Shantou are currently being upgraded in readiness for the new influx of coal. The planners are well aware of the need to bring these pro- jects to fruition on time and to operate them efficiently once completed: failure to do so will expose the northern coal producers to intense competition from overseas suppliers now that official policy has veered towards market pricing of energy.IV

Conclusion

Coal mining has preoccupied Chinese planners in recent years for two cogent reasons. In the first place, it promises to meet the inevitably huge and rising energy demands imposed by the weight of population. In the second, it offers the prospect of rooting development in those places touched by its exploitation. This latter not only embraces the coalfield regions themselves, but it embodies the ports critical to the distribution of coal throughout the domestic economy. Once established, the ports are open to diversification, serving to despatch coal overseas and, therein, adhering to their function - familiar elsewhere - as vehicles for achieving export earnings. Indeed, all the patterns of coal production and supply implemented in China since 1949, and the roles played by the different transport modes engaged in coal haulage, are the outcomes of basic policies that have a strong bearing on regional development. Implicit in these policies is the understanding that decisions made about the scale and location of coal production, the car- riage of coal and the expansion of ports, ultimately aim to attain territorial economic integration, an integration tempered by acknowledgement of the need to reduce the glaring imbalances contained in the coastal (1) interior divisions obtaining in the country. Coal investments favour the northern interior because they respond to geographical endowment. Port investments, however, seem to run counter to the aim of correcting the imbalance. Yet policy was conceived with a view to dispelling such impressions, geared as it was to redress- ing structural shortcomings associated with the ports. After all, prior to 1949 the ports were essentially foreign enclaves, set up to effect exports from their immediate hinterlands as well as to serve as conduits for imports. While it remains debatable whether they occasioned the unequal urban and industrial growth patterns inherited by the present regime, they certainly contributed little or nothing to regional development outside their tightly constrained hinterlands. 18 From 1949 until 1979, when the open door policy was initiated, the ports and the coastal regions in general, by and large, were neglected and priority for development was conferred on the interior. Subsequent developments have greatly revived investment in the coastal regions. However, a caveat is


in order: a significant portion of that investment owes its genesis to the planned integration of northern ports into the national coal supply system concentrated on Shanxi. The port of Qinhuangdao attests to this rationale.

In sum, the Chinese experience is salutary in several respects. First, it demonstrates that the very act of pro- moting wholesale industrialization tends to create bottlenecks in energy supply, and that it is difficult to overcome this crucial problem until an immense investment in coal production is accomplished and an efficient and well organized transport infrastructure is built up. Second, it underscores the lesson that a programme of investment in widely dispersed, small mines often car- ries with it a cost penalty; that is, the cost of forgoing the economies of scale which arise out of investment in large mines in a few, richly endowed coalfields. These economies can be so great as to neutralize any benefits of reduced transport costs which small mines can reap from locations close to major markets. Third, it suggests that the emphasis on coastal shipping in conjunction with rail transport to the ports is correct. In other words, it is grounded in a rational appreciation of the alternatives available for matching coal supply, geographically concentrated in origin, with coal demand, which is much more scattered in incidence. Last, it implies that autarky need not be maintained indefinitely and that a portion of the coal supply can be usefully diverted to export markets.

Thanks to the Social Sciences and Humanities Research Council of Canada, we were enabled to undertake fieldwork in the regions mentioned in this paper.

IWittingly or otherwise, China is subscribing to the view that infrastructure precedes directly productive activity. See A O Hirschman, The Strategy of Economic Development, Yale University Press, New Haven, 1958. 2The link between coal, railways and ports is extremely long standing. Arguably, the wagonway precursors of the railway in conjunction with coal staith marine terminals spawned the entire industrialization process. The link was certainly instrumental in engendering the spe- cialist port which thrived on coal shipments. Note N R Elliott, 'Tyneside, a study in the development of an industrial seaport', Tijdsehrift voor Economische en Sociale Geografie, Vol 53, 1962, pp 225-237; and M J Daunton, Coal Metropolis: Cardiff 1870-1914, Leicester University Press, Leicester, 1977. 3M Ledic, "The energy sector', in D S G Goodman, ed, China's Regional Development, Routledge, London, 1989, pp 94-111. 4Figures compiled from Wen-yan Li, ed, China's Industrial

China's energy, supply policy: D Todd and Z Lei

Geography, Science Press, Beijing, 1990, pp 64-75. 5Wen-yan Li, "Contemporary spatial issues', in G J R Linge and D K Forbes, eds, China's Spatial Economy, Oxford University Press, Oxford, 1990, pp 59-84. 6Usages determined by the World Bank in its China: Long-Term Development Issues and Options, Johns Hopkins University Press, Baltimore, MD, 1985. 7The bottleneck issue is addressed in the China Railway Society, Railways of China, 1949-1990, Beijing, 1991 and by S Breslin, 'Shanxi: China's powerhouse', in D S G Goodman, ed, China's Regional Development, Routledge, London, 1989, pp 135-152. SDespite controlling 57 000 km of inland waterways, the planners were prevented from pressing them into use for interregional coal car- riage because of their shallow draughts (denying access to all but the shallowest barges) and complicated routeings. 9Chinese ports in general are dealt with by T N Chiu and D K Y Chu, 'Port development in the People's Republic of China: readjustment under programmes of accelerated economic growth', in B S Hoyle and D Hilling, eds, Seaport Systems and Spatial Change, John Wiley, Chichester, 1984, pp 199-215; and Wei-cheng Shen, 'Development and problems of China's seaports', in G J R Linge and D K Forbes, eds, China's Spatial Economy, Oxford University Press, Oxford, 1990, pp 96--108. L°Noted in Tien-tung Hsueh and Tun-oy Woo, The Economics of Industrial Development in the People's Republic of China, The Chinese University of Hong Kong, Shatin, 1991, p 91. ~L See 'Carrying coals to Shanghai', Fairplay International Shipping Weekly, 17 February 1994, p 30. 12I M Heine, China's Rise to Commercial Maritime Power, Greenwood, Westport, 1989. t3Described in P Jensen, "Ports', The China Business Review, Vol 16, No 2, 1989, pp 20-.-26. ~4 Productivity and cost data derive from the State Statistical Bureau. The circumstances surrounding the pricing of Shanxi coal in the 1980s are deliberated in K Lieberthal and M Oksenberg, Policy Making in China: Leaders. Structures. and Processes. Princeton University Press, Princeton, 1988. ~SJing Wei, 'China's biggest energy-producing centre', Beijing Review, No 49, December 1984, pp 16-18. L6Qinhuangdao's story is told in F C Jones, Shanghai and Tientsin: With Special RefOrence to Foreign Interests. American Council, Institute of Pacific Relations, San Francisco, 1940; G C Allen and A G Donnithorne, Western Enterprise in Far Eastern Economic Development, George Allen and Unwin, London, 1954; E C Carlson, The Kaiping Mines, 1877-1912, Harvard University Press, Cambridge, MA, 1971; Xiao-zheng Guao, Stuclv of the Relationship and Economic Development of the Port-City in Northern China, un- published PhD thesis (in Chinese), Peking University, 1988; and Ministry of Communications, China's Principal Ports jbr Foreign Trade, People's Communications Publishing House, Beijing, 1990. t VIn 1993 China General Coal Corporation, conceding the inevitability of market pricing, raised to 57% the proportion of its output sold at market rates. See C Goldstein, 'Into the black', Far Eastern Economic Review, Vol 156, No 13, 1 April 1993, pp 66~7. LSA point asserted in R Murphey, 'The treaty ports and China's mod- ernization', in MElvin and G W Skinner, eds, The Chinese Ci(~' Between Two Worlds, Stanford University Press, Stanford, 1974, pp 17-71.

Energ3 Policy 1994 Volume 22 Number 7 621

Documents

Ports and coal transfer: Hug of China's energy supply policy