China coal imports surge, prices hit record as floods add to energy woes

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BEIJING (Businesshala) – China’s coal imports jumped 76% in September as power plants scramble for fuel to ease power shortages, setting domestic coal prices to a record high and the world’s second-highest leading to disruption of business activity in the larger economy.

FILE PHOTO: A man walks near China Energy’s coal-fired power plant in Shenyang, Liaoning province, China September 29, 2021. Businesshala / Tsingshu Wang

Flooding in a major coal-producing province has worsened the supply outlook, with analysts expecting power shortages and rationing to continue into early next year.

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China, the world’s biggest coal consumer, is grappling with a growing energy crisis caused by fuel shortages and record high prices. The government has taken several steps to boost coal production and manage power demand in industrial plants, while power producers and other coal users are ramping up imports.

On Tuesday, the government took its boldest step in a decades-long reform in the power sector by allowing coal-fired power plants to pass on the high cost of production to some end-users through market-driven electricity prices, prompting global warming. Concerns about construction increased. inflation pressure.

China’s state planner said at a news briefing on Wednesday that it would secure domestic coal and energy supplies for this winter while ensuring the country meets its climate change goals. [B9N2QE019]

According to a National Energy Administration official at the same news briefing, daily coal production has hit an all-time high of more than 11.2 million tonnes since February, while the average coal stock at its power plants could support about 15 days of use. Is. [L1N2R90M0]

Official data on Wednesday showed China’s coal imports last month hit their highest level this year.

A total of 32.88 million tonnes were imported in September, up 76% from a year ago. According to Businesshala calculations, the monthly tally was the fifth highest on record.

More than half of Mainland China’s regions managed by the state grid have implemented power consumption cuts since last month.

Graphic: China Monthly Coal Imports Since 2015

Local governments in the top Chinese coal-producing regions of Shanxi and Inner Mongolia have ordered some 200 mines to boost production, but incessant rains have flooded 60 mines in Shanxi. A Shanxi official said on Tuesday that four mines with a combined annual production capacity of 4.8 million tonnes remained closed.

Graphic: Floods in North China

The most active January Zhengzhou thermal coal futures touched a record 1,640 yuan ($254.44) per tonne on Wednesday, having risen nearly three-fold year-on-year.

The surge comes a day after Beijing announced it would allow power plants to charge commercial customers market-based prices for electricity, a significant break from a previous policy that forced the industry to lock in fixed-price deals with suppliers. was allowed to do.

Power-hungry industries such as steel, aluminium, cement and chemical producers may face higher and more volatile power costs under the new policy, raising their costs and straining profit margins. [L1N2R904N]

Despite the disruptions, Wednesday’s data showed China’s overall export growth unexpectedly accelerated in September as strong global demand offsets power shortages and other issues.

“Although power rationing has not derailed the export sector so far, there is a risk that it could do so in the coming weeks,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note.

“And while officials have clarified that the focus of power rationing will be on energy-intensive sectors such as metals and chemicals, the hit to production in these industries could filter through supply chains and hurt downstream exporters.”

Factories in the eastern provinces of Guangdong and Zhejiang, both major export powerhouses, have been told to reduce their production throughout the week.

The European Chamber of Commerce said some European firms in the country are facing delays in orders, while others are unhappy with how Chinese officials sometimes inform them of power cuts late at night.

China, the world’s largest steel producer, on Wednesday asked steel mills in 28 cities to cut winter output by at least 30% to meet production and climate targets.

China is not the only country struggling with power outages, which have led to fuel shortages and blackouts in some countries. The crisis has highlighted the difficulty in reducing the global economy’s reliance on fossil fuels as world leaders seek to revive efforts to tackle climate change at talks in Glasgow next month.

increase in coal imports

China’s giant industrial engine, which cranks out mountains of electronics, toys, clothing and appliances for global markets, saw lower overall power consumption in September and year-over-year.

Consumption last month rose 6.8% from a year earlier to 694.7 billion kilowatt hours (kWh), showing a 12.9% year-on-year increase of total electricity use in the first nine months.

Graphic: China’s primary energy source fueled by

Businesshala reported last week that China is releasing Australian coal from bonded storage, but has not lifted a nearly year-long, unofficial import ban on the fuel.

Exports from other major suppliers such as Russia and Mongolia have been cut short by limited rail capacity, while shipments from Indonesia have been disrupted by the rainy season.

China’s energy crisis is expected to last into the winter, with analysts and traders forecasting a 12% drop in industrial electricity consumption in the fourth quarter as coal supplies dwindle and local governments prioritize residential users.

($1 = 6.4455 Chinese Yuan Renminbi)

Reporting by Gavin Maguire in Singapore, Muyu Xu and Shivani Singh in Beijing; Additional reporting by Emily Chow in Shanghai; Editing by Lincoln Feast and Kim Coghilla

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