China Coal Imports Rise, Prices Hit Record As Floods Worsen Energy Problems
- Zhengzhou thermal coal futures in January hit record high
- The price spike comes a day after the government liberalized the electricity market
- Coal imports at their highest for the year in September
- Data shows China’s September exports unaffected by power shortages
BEIJING, Oct. 13 (Reuters) – Chinese coal imports jumped 76% in September as power plants scrambled for fuel to alleviate the energy crisis that is pushing domestic coal prices to record highs and disrupts the business activity of the world’s second-largest economy.
Flooding in a key coal-producing province has worsened supply prospects, with power shortages and rationing set to continue early next year.
China, the world’s largest consumer of coal, is grappling with a growing energy crisis brought on by shortages and record prices for fuel. The government has taken a series of measures to boost coal production and manage the demand for electricity in industrial facilities, while power producers and other coal users have increased their imports.
On Tuesday, the government took its boldest step in a decades-long reform of the electricity sector by allowing coal-fired power plants to pass high production costs on to some end users through electricity prices. determined by the market, adding to concerns about global construction inflationary pressures. Read more
Data on Wednesday showed that China’s coal imports last month hit their highest level this year.
Imports totaled 32.88 million tonnes in September, up 76 percent from the previous year, according to data from the General Customs Administration. The monthly tally was the fifth highest on record, according to Reuters calculations.
Local governments in China’s main coal-producing regions, Shanxi and Inner Mongolia, have ordered some 200 mines to boost production, but relentless rains have flooded 60 mines in Shanxi. Four mines with a combined annual production capacity of 4.8 million tonnes remained closed, a Shanxi official said at a press conference on Tuesday.
Zhengzhou’s most active thermal coal futures in January hit a record 1,640 yuan ($ 254.44) per tonne on Wednesday, after nearly tripling since the start of the year.
The price hike comes a day after Beijing announced it would allow power plants to charge commercial customers market-based electricity prices, a significant departure from the previous policy that allowed industry to enter into fixed price electricity agreements with suppliers.
The policy change, which is expected to boost coal-fired generation, is the latest in a series of measures designed to alleviate the electricity crisis that has forced several industrial sectors in China to reduce consumption and production of electricity these last few weeks.
Energy-intensive industries such as steel, aluminum, cement and chemical producers are expected to face higher and more volatile electricity costs as previous fixed cost agreements are replaced by prices based on the market. L1N2R904N
Despite the disruptions, data on Wednesday showed that the overall export growth of the world’s second-largest economy accelerated unexpectedly in September, with strong global demand offsetting some of the pressure on factories from power shortages and Other problems. Read more
“Although electricity rationing does not appear to have derailed the export sector so far, there is still a risk that it will in the coming weeks,” said Julian Evans-Pritchard, Chinese economist. principal at Capital Economics, in a note.
“And although officials have made it clear that electricity rationing will focus on energy-intensive sectors such as metals and chemicals, the impact on production in these industries could filter through power chains. ‘supply and harm downstream exporters. “
The country, the world’s largest steel producer, on Wednesday asked steelworks in 28 cities to cut winter production by at least 30% to meet production and climate targets.
The European Chamber of Commerce said some European companies operating in China are facing order delays while others are unhappy with the way Chinese authorities notify them of power outages sometimes late at night. Read more
INCREASE IN COAL IMPORTS
China’s gigantic industrial engine, which produces mountains of electronics, toys, clothing and equipment for global markets, saw its total electricity consumption in September and since the start of the year increase by a year over year.
Electricity consumption in September rose 6.8% from 694.7 billion kilowatt-hours (kwh) a year earlier, bringing total electricity consumption in the first nine months up 12.9 % year-on-year, the National Energy Administration said on Wednesday.
China is not the only nation struggling with electricity supplies, which has led to fuel shortages and blackouts in some countries. The crisis has highlighted the difficulty of reducing the global economy’s dependence on fossil fuels as world leaders seek to revive efforts to tackle climate change during talks next month in Glasgow. Read more
Reuters reported last week that China had released Australian coal from bonded storage but failed to lift an unofficial almost-year-long import ban on the fuel. Read more
Exports from other key suppliers, such as Russia and Mongolia, were constrained by limited rail capacity, while shipments from Indonesia were hampered by the rainy weather, traders said. Read more
Power plants are also looking to diversify sources of coal from niche markets such as Kazakhstan. Read more
China’s energy crisis is expected to last through winter, with analysts and traders forecasting a 12% drop in industrial electricity consumption in the fourth quarter as coal supplies are insufficient and local governments give priority to residential users. Read more
($ 1 = 6.4455 yuan Chinese renminbi)
Reporting by Gavin Maguire, Muyu Xu and Shivani Singh; additional reporting by Emily Chow; Editing by Lincoln Feast and Kim Coghill
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