* Seven in hospital, nine arrested after clash with police
* Illegal labour unrest spreads across coal industry
* Exxaro threatens to fire striking miners
JOHANNESBURG, March 20 (Reuters) - Police fired rubber bullets at striking workers at Shanduka Coal's Graspan colliery in South Africa after the demonstrators tried to charge their lines with earth-moving equipment, police and the company said on Wednesday.
Seven workers were admitted to hospital and nine were arrested after the incident on Tuesday. Operations at Graspan remained suspended on Wednesday following the wildcat protest by about 250 employees.
The Shanduka walkout adds to growing labour unrest in South Africa's coal industry, which flared again two weeks ago after violent mining strikes last year which included the killing by police of 34 striking platinum miners.
The problems could seriously hit the sector and affect electricity supplies.
Shanduka Coal, partly owned by global commodity trader Glencore, said the walkout was unlawful and a breach of employees' contracts.
"The police dispersed the striking employees, who were on mine premises illegally, had seized mine equipment, and were refusing to leave peacefully," it said in a statement.
Police said workers refused to disperse after handing over a notice to management detailing their demands. Some of them charged the police lines with heavy earth-moving equipment, said
Mpumalanga province police spokesman Brigadier Selvy Mohlala.
"That is when the police used rubber bullets to disperse the crowd," he said.
National Union of Mineworkers spokesman Lesiba Seshoka said he was not sure if the injured workers were NUM members or not.
"But we are very concerned about the actions of the police. We have sent an investigating team to investigate allegations that live ammunition was used," he told Reuters.
The labour strife in the coal industry started at collieries owned by diversified mining company Exxaro two weeks ago, with operations at five of its collieries and a char plant, which supplies the ferroalloys industry, suspended.
Exxaro said on Wednesday it could dismiss the 3,200 coal miners who are participating in the illegal strike if they refused to return to work by next week.
"At this stage the company is weighing its options going forward, but engagement continues with the National Union of Mineworkers to try get people back to work and to find a solution," it said in a written response to questions.
Exxaro's strike also turned violent this week, with police firing rubber bullets at strikers at one mine.
A prolonged shutdown at coal mines could put pressure on state electricity utility Eskom, which uses coal to generate 85 percent of the electricity powering Africa's biggest economy.
Eskom is already struggling to keep power flowing to factories, mines and smelters that had to shut for days five years ago when the national grid nearly collapsed, costing billions of dollars in lost output.