By MuyuXu and Shivani S
BEIJING, (Reuters) – China’s coal prices remained at record levels on Thursday. Cold weather swept through the north of the country and power plants stocked up to reduce an energy shortage that is fuelling unimaginable factory gate inflation.
China’s power crisis has caused many factories to stop production, including those that supply big brands like Apple Inc (NASDAQ:).
In September, the Producer Price Index (PPI), which rose 10.7% in a year due to rising energy prices, reached its highest level in 25 years. This was according to official Chinese data.
It is possible for the situation to become more severe during winter.
The National Meteorological Center in China predicted Wednesday that heavy winds would knock down the average temperature to 14° Celsius in many parts of China.
Graphic: Temperatures in northern China dip below normal, boosting heating demand amid power pinch – https://fingfx.thomsonreuters.com/gfx/ce/lbpgnobnyvq/BeijingTempsOct132021.png
Three northeastern provinces, Jilin and Heliongjiang, were among those most affected by last month’s power outages. To cope with the harsher than normal weather, many regions of northern China, including Inner Mongolia, Gansu and Gansu have begun winter heating. This is mostly fuelled by coal.
Beijing took a variety of steps to control rising coal prices, including increasing domestic coal production and rationing power at factories. They also ensured that winter heating season energy supplies are secure. [B9N2QE019]
China made the boldest decision in a decade-long power sector reform earlier this week by allowing coal-fired plants to transmit high-generation costs to end-users using market-driven electricity prices.
Beijing had tried to lessen its dependence on dirty coal, in favor of cleaner wind, solar, and hydro power.
It’s important to ensure that people stay warm, and that businesses continue to operate. Dimitri de Boer is the chief China representative of ClientEarth, an European environmental consulting firm. To avoid future similarities, this should be paired with rapid deployment of renewables.
The local governments of top Chinese coal-producing areas Shanxi, Inner Mongolia and Inner Mongolia ordered 200 mines to increase output. However, flooding in Shanxi has affected the supply outlook. Analysts expect electricity shortages and rationing will continue well into next year.
In order to increase production, banks offer loans to the coal mines. The top China coal-mining hub Shanxi Group received a 1 Billion Yuan (or $155.30 Million) loan from a Chinese bank to resume operations following floods. This was according to an official China newspaper.
The daily output of coal has risen to more than 11 million tonnes since February. Meanwhile, average coal stocks in its power stations can sustain about 15 days, an official with the National Energy Administration stated during Wednesday’s news briefing. [L1N2R90M0]
On Wednesday, official data showed that China’s total coal imports rose to the highest point this year.
More than half of the regions https://graphics.reuters.com/CHINA-POWER/jnvweyzazvw/chart.png in Mainland China managed by State Grid have enforced power consumption cuts since last month.
Graphic: China power rationing map – https://fingfx.thomsonreuters.com/gfx/ce/egpbkmmykvq/Chinamonthlycoalimports.png
Up 3%, January Zhengzhou’s most active thermal coal futures traded at 1,608.8yuan/tonne on Thursday. This contract was trading at record highs on Wednesday, and has risen by more than 2000% in the past year.
Graphic: Global coal prices surge on booming power use, tight supplies in China – https://fingfx.thomsonreuters.com/gfx/ce/zjpqkekmlpx/WorldCoalPrices.png
($1 = 6.4392 renminbi)