Sat, Oct 16, 2021 page10

• China coal hits record highs amid early winter

  BOOMING DEMAND: An unexpected temperature drop deepened China’s energy problems, as heating needs increase amid energy shortages and power rationing

  • Reuters, Beijing
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  China’s energy crisis deepened yesterday as cold weather swept into much of the country and power plants scrambled to stock up on coal, sending prices of the fuel to record highs.

  Demand for electricity to heat homes and offices is expected to soar this week as strong cold winds descend from northern China. Forecasters predict average temperatures in some central and eastern regions could fall by as much as 16°C in the next two to three days.

  Shortages of coal, high fuel prices and booming post-pandemic industrial demand have sparked widespread power shortages in the world’s second-largest economy. Rationing has already been in place in at least 17 of China’s more than 30 regions since September, forcing some factories to suspend production and disrupting supply chains.

  

  A man walks past a coal-fired power plant in Shanghai, China, on Thursday.

  Photo: Reuters

  Zhengzhou thermal coal futures hit 1,669.40 yuan (US$259.71) per tonne early yesterday. The contract has risen more than 200 percent in the year to date.

  The three northeastern provinces of Jilin, Heilongjiang and Liaoning — among the worst hit by the power shortages last month — and several regions in northern China, including Inner Mongolia and Gansu, have started winter heating, which is mainly fueled by coal, to cope with the early cold weather.

  Beijing has taken a slew of measures to contain coal price rises, including raising domestic coal output and cutting power to industries and some factories during periods of peak demand. It has repeatedly assured users that energy supplies have been secured for the winter heating season.

  However, power shortages are expected to continue into early next year, with analysts and traders forecasting a 12 percent drop in industrial power consumption in the fourth quarter as coal supplies fall short and local governments give priority to residential users.

  Earlier this week, China, in its boldest step in a decades-long power sector reform, said it would allow coal-fired power prices to fluctuate by up to 20 percent from base levels from Oct. 15, enabling power plants to pass on more of the high costs of generation to commercial and industrial end-users.

  Steel, aluminum, cement and chemical producers are expected to face higher and more volatile power costs under the new policy, pressuring profit margins. Data on Thursday showed factory-gate inflation last month hit a record high.

  China aims to be “carbon neutral” by 2060, and Beijing has been trying to reduce its reliance on polluting coal power in favor of cleaner wind, solar and hydro. But coal is expected to provide the bulk of its electricity needs for some time.

  China is not the only nation struggling with power supplies, and the crisis has highlighted the difficulty in cutting the global economy’s dependency on fossil fuels as world leaders seek to tackle climate change at talks next month in Glasgow.
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