- Chinese Met Office predicts sharp drop in temperatures
- Coal prices, imports soar as demand increases
- Rising electricity prices are fueling factory exit inflation
BEIJING, Oct. 14 (Reuters) – Coal prices in China hit record highs on Thursday as cold weather hit the north of the country and power plants sourced fuel to ease an energy crisis that is fueling unprecedented inflation leaving factories.
A growing energy crisis in China, affecting at least 17 regions – caused by coal shortages, record fuel prices and booming post-pandemic industrial demand as it shifts to greener fuels – has led to a disruption of production in many factories. Read more
Soaring energy prices pushed producer prices to their highest level in at least 25 years in September, up 10.7% from the previous year, data showed Thursday. Read more
The winter cold is likely to worsen the situation.
China’s National Meteorological Center has predicted that strong winds could lower the average temperature by 14 degrees Celsius across much of the country this week.
The three northeastern provinces of Jilin, Heilongjiang and Liaoning – among the worst hit by power cuts last month – and several regions in northern China, including Inner Mongolia and Gansu, have started to heat up. winter, mainly charcoal, to cope with colder than normal weather.
Beijing has taken a series of measures to contain rising coal prices, including increasing domestic coal production, rationing electricity at factories, and securing energy supplies for the winter heating season. . B9N2QE019 read more
STRENGTHENING THE COAL SUPPLY
China has approved 153 coal mines to increase capacity, expecting to add 55 million tonnes of coal in the fourth quarter.
Daily coal production reached its highest level since February at more than 11.2 million tonnes, an official with China’s National Energy Administration said on Wednesday.
But flooding in major coal producer Shanxi has worsened the supply outlook, with analysts expecting power shortages and rationing to continue early next year.
Banks provide loans to coal mines to support production increases. The Shanxi Coking Coal Group, China’s main coal mining hub, received a 1 billion yuan ($ 155.30 million) bank loan to resume operations after the floods, according to a newspaper backed by the central bank of China on Wednesday.
“The supply of coal remains very limited in northeast China. Stocks at power plants in the region have only reached about a third of the levels of previous years, ”said a Jilin-based coal trader, adding that the current level was well over two weeks. a few years ago, some power plants had stocks close to zero.
The NEA official said that the total stock of shippable coal in China can withstand about 15 days of use.
China has also increased its imports of coal, and Reuters announced last week that it was releasing Australian coal from bonded storage after an unofficial import ban of nearly a year on fuel. Read more
Russia’s TASS news agency reported on Thursday that China had asked Russia to double its electricity supply in November-December.
LIBERALIZATION OF ENERGY PRICES
Earlier this week, China, in its most daring step in a decades-long power sector reform, said it would allow coal-fired electricity prices to fluctuate by up to 20% above baseline levels, allowing power plants to pass on more of the high production costs. to commercial and industrial end users. Read more
This has raised expectations among some analysts, which would encourage power producers to increase their production. Read more
However, others believe that still would not offset the high costs of coal.
Efforts to restore power to the country “rely much more on administrative pressure and orders than economic incentives at power plants,” said Lauri Myllyvirta, chief analyst at the Center for Energy and Energy Research. clean air in Helsinki.
“At current coal prices, the tariff increase allowed by the wider price bracket is a modest sweetener at best. Myllyvirta added that “at 1,500 yuan per ton, the fuel cost per kilowatt hour is 0.6-0.7 yuan while benchmarks are generally less than 0.4 yuan per unit.”
As Beijing reiterated that it will not undermine mining safety standards while increasing coal production, coal miners are scrambling to add investments to ensure mine safety, which could further increase the prices of the coal. coal.
A subsidiary of Shanxi LuAn Mining Group (601699.SS) announced Thursday that it will tighten mine safety standards, which will reduce profitability by 400-500 million yuan in 2021.
As a sign that consumer inflation is not indefinitely immune to broader price pressures, Foshan Haitian, China’s largest soy sauce maker, said this week that it plans to increase prices. prices up to 7% from 25 October due to rising raw material costs. , transport and energy.
Beijing had tried to reduce its reliance on polluting coal power in favor of cleaner wind, solar and water power.
“Making sure people are warm and businesses keep running – that’s obvious, of course you need it. Even as an environmentalist, you don’t want to find yourself in a situation where you risk turning society against the climate transition, ”said Dimitri de Boer. , Chief Representative of China to the European environmental consultancy firm ClientEarth. “But this should be coupled with the deployment of renewable energies as quickly as possible, to avoid similar situations in the future. “
January’s most active Zhengzhou thermal coal futures closed 3.36% higher at 1,615.8 yuan per tonne on Thursday. The contract traded near record highs reached on Wednesday and has risen more than 200% since the start of the year.
($ 1 = 6.4392 Chinese yuan)
(This story corrects and clarifies the security investment of the Shanxi LuAn Mining Group subsidiary, paragraph 22)
Reporting by Muyu Xu and Shivani Singh in Beijing, and David Stanway in Kunming; Editing by Lincoln Feast and Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.