Good news for Australian coal exporters, China, the world's biggest producer and consumer, is facing an increasing shortfall as demand outstrips supply.

That's coming from soaring demand for power from industry in full bore, and the impact of a sudden hot spell which this week had the country's national grid managers warning of localised power shortages between now and the end of August.

That heat wave comes after wet weather and a drought over the past year, but what has surprised is the suddenness of the power shortages.

China was already expected to become the world's biggest thermal coal importer this year, overtaking Japan.

That's only three years after China became a net importer of coal.

Imports in the first five months of this year more than doubled to 68.9 million tonnes, although the level of imports in May was the lower so far in 2010, it was still higher than in May 2009.

Australian Coal Association figures show that we shipped 25 million tonnes of coal to China in 2008-09 (16.5 million tonnes of coking coal and 9.5 million tonnes of thermal coal).

Japan was a major market taking around 32% of total exports, against China's 9.5%.

But now, China's demand is growing far more quickly than the coal industry thought, with much of the extra demand happening in thermal coal for power stations (and cement plants).

This is being driven by rising demand and falling production as China closes many old or illegal and unsafe mines and forces smaller producers to consolidate into larger companies.

Now there's a belief that China's thermal coal net imports (China is still a small exporter) will reach to between 105 million and 115 million tonnes in calendar 2010, against Japan's 110 million tonnes (of which Australia will supply the majority, some 61 million tonnes, according to forecasts).

China's Ministry for Industry said this week that coal imports rose 114.3% year on year to 68.98 million tonnes in the five months ending May.

The department said the rise was due to increased demand to the power, steel, cement and chemical fertilizer industries.

In 2009, China imported 126 million tonnes of coal and exported 22.4 million tonnes.

The Customs Department said May imports rose 16.59% from a year earlier to 11 million tonnes but fell by 19% from April.

Imports of coking coal fell from 4.5 million tonnes in April to 3.86 million tonnes in May.

Now there are fears the heat wave will produce power shortages as China's existing power industry strains to produce enough power.

There is also talk of the central government ordering some regional governments and coal companies not to hike prices in summer and take advantage of high demand and supply shortages.

According to reports in the official media in China, the country's major power grid operator said on Tuesday that power shortages were now possible over the next couple of months.

"Power shortages will occur in central, eastern and northern parts of the country during peak summer hours, as uncertainties still exist in demand and supply, the State Grid Corp of China said. The operator is responsible for power supply in 26 provinces, municipalities and autonomous regions.

"According to a forecast by State Grid, the nation's power generation is expected to reach up to 13.3 billion kilowatt-hours (kWh) per day, up 8.6 percent from a year earlier. Many factors will affect the power supply such as "extreme weather and prices and transportation of coal", the company said in a statement.

"The scorching heat this week has increased power use. But it will not put great pressure on supplies as most of the demand surge is from civilian use, which has a small share in total consumption, said sources.

"With temperatures over 35 degrees Celsius, at least 16 provinces, autonomous regions and municipalities are sweltering in summer heat, the National Meteorological Center (NMC) said when issuing a level yellow heat alert.

"The heat wave is affecting large parts of southern China, eastern Shandong, Anhui and Jiangsu provinces, northwestern Gansu Province, and north China's Beijing, Tianjin, Inner Mongolia Autonomous Region and Shanxi Province," the NMC said in a bulletin on its website.

According to State Grid, China's total power generation was 12.93 billion kWh on Monday, an all-time record.

"Loads of five power grids under the management of the company also scaled new peaks on the same day.

"The country is unlikely to see widespread power blackouts this summer, as the supply will remain stable and policies to curb excessive energy consumption have begun to take effect," said Xue Jing, head of the statistics department of the China Electricity Council.

But power shortages could still occur in areas with insufficient installed power capacity or coal supplies, she said.

But some analysts in China say declining demand from industry (which is expected to continue for the rest of the year) will see the burden on the power industry and grid eased, slowly.

And the lower level of demand (especially from steel and cement industries) will also take some of the heat out of the coal import market.

According to Xinhua, official figures showed that demand from heavy industry accounted for 62% of total power consumption in the first five months of this year.

But there's a forecast that China's power consumption would peak in late July or early August this year, when the national electricity load might climb to 13.5 billion kilowatts, up 10% from a year ago.