China's top economic planner, the National Development and Reform Commission (NDRC), confirmed Thursday the order to stop all coal-to-oil projects except for two. Industry analysts say this reflects the government's intention to press down coal price.

    Coal price in China has been hovering at a high level in recent months after sharp rises in the first half of this year.

    Earlier in June, the NDRC also took a temporary intervention measure to ban the price rise of coal used for power generation.

    Earlier around 2006 when the international crude oil price was still below 50 US dollars/bbl, many companies in China prepared to construct coal-to-oil projects. Such projects are believed to be profitable when the oil price stands above 70 US dollars/bbl.

    As the international crude oil price hit a record high of nearly 150 US dollars/bbl in the first half of this year, many Chinese coal companies including Lu'an, Yanzhou Coal and Yitai, announced to kick off coal liquefaction projects as early as possible.

    The NDRC order to stop all coal-to-oil projects except for two is no doubt a snub, said Wang Shuai, an analyst with Orient Securities, adding that even without the order, many companies may also be forced to give up their plans for such projects when coal price surges further and oil price falls.

    Chinese government has all along taken a prudent attitude toward the construction of coal-to-oil projects that involves controversial problems of high input, high energy consumption and using one energy to substitute another.

    The direct coal liquefaction project of Shenhua Group in Ordos of Inner Mongolia Autonomous Region, is the only coal-to-oil project now under construction in China. It is reportedly to postpone its date of operation originally scheduled for September.

    Aside from the project of Shenhua, NDRC also has permitted the Ningdong indirect coal liquefaction project jointly undertaken by Ningxia Coal Industry Group Co., Ltd and Sasol Ltd. to go ahead.