China’s coal and electricity crisis hits global economy
Soaring coal prices and power shortages in China slowed growth in the world’s second-largest economy in the third quarter and threaten to spill over into global supply chains in the fourth quarter.
Last week, coal futures in China hit an all-time high after sixty coal mines in the country’s main coal-producing region were forced to close due to heavy rains, flooding and landslides. on the ground, exacerbating the energy supply crisis.
Later in the week, colder-than-normal weather in parts of China pushed coal prices to new highs, while demand for electricity soared. Growing demand for electricity along with cooler weather and an industrial recovery after the pandemic has led to coal shortages in the country, which has rationed electricity supplies in at least 17 of the mainland regions since last month.
Since the start of the year, the price of China’s most actively traded coal futures has climbed more than 200%, according to Reuters estimates.
As temperatures plunged further over the weekend, coal futures hit a new high today.
Power cuts and weak property investment after the Evergrande debacle resulted in weaker-than-expected economic growth in China in the third quarter. Gross domestic product (GDP) rose 4.9% in the third quarter compared to the same quarter last year, below the 5.2% growth expected by analysts in a Reuters poll.
Slowing Chinese economic growth and power cuts at factories risk further disrupting global supply chains, which have already been strained by massive chip shortages and delays in shipments of various inputs.
For example, Dutch conglomerate Phillips warned Monday that its third-quarter sales were “favorably affected by intensifying global supply chain issues, such as shortages of electronic components.”
“Supply chain volatility has intensified globally, which has already resulted in longer lead times to convert our strong order backlog to revenue in the third quarter, and we expect this wind to rise. contrary will continue in the fourth quarter, “said CEO Frans van Houten.
By Tsvetana Paraskova for OilUSD
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