Jason Hovet, MuyuXu, and Kevin Yao

BEIJING/PRAGUE – China’s economy has fallen to its lowest point in a decade due to power scarcity. However, rising coal prices Monday will cause more problems for the Chinese industrial sector and supply chain.

European companies have reduced their outlooks due to global bottlenecks. However, European gas prices are still higher than they were at the beginning of 2021. This has caused more power supply firms across Europe to collapse.

Czech Republic’s energy regulator made an extraordinary move to ask suppliers to confirm that they can supply electricity to homes and businesses after one of its gas or electricity companies had stopped supplies.

Due to the rise in energy prices, suppliers in Europe, such as Britain, also have collapsed in recent weeks.

Ohm Energy, a power supplier in Asia, announced on its website Friday that it was leaving the Singapore retail electricity market. This is the third such announcement in the last week.

Beijing took a series of measures to improve China’s coal production, as it is the main fuel for about half of China’s power plants. Data on Monday revealed that these steps took time for the data to show while power demand continued to rise.

China’s last month coal production was 334.24 Million tonnes, which is 0.9% less than the previous year, according to official data.

That’s 9.14 million tonnes of output per day in September, according to Reuters calculations. These figures are only slightly lower than the China data released last week that showed daily production was greater than 11.2 million tonnes.

LOSING THE BATTLE

Alex Whitworth, Wood Mackenzie’s head of Asia Pacific power & renewables research stated that the Chinese government has lost its battle against soaring prices for coal.

“Despite all efforts to increase coal supplies, September saw a decline in output due to safety, weather and logistical challenges. China has not been able to restrain its booming energy demand.

According to data, power shortages contributed to China’s slowdown in growth during the third quarter. 2.9% was the slowest growth rate in China’s second largest economy since 2020, and 7.9% slower than the previous quarter.

Chinese coal supplies are running low, which has caused fuel prices to rise for power generators in China. Unprofitable businesses have had to cut back on power consumption and forced some factories to cease production. This disrupted global supply chains.

European companies have been feeling the pinch. There are challenges such as shortages of memory chips, and insufficient shipping containers.

HEADWIND TO CONTINUE

Philips, a Dutch company in health technology, has recently lowered its forecast for profit growth and sales for 2021. It said that a shortage of electronic parts had impacted third quarter earnings. The recall of respiratory products also hurt the business.

Frans van Houten, CEO said: “Supply Chain volatility has increased globally.” We expect this headwind will continue into the fourth quarter.

Oil prices are still at an all-time high, with crude oil reaching new highs of $85 per barrel on Monday and more than 60% so far this year. [O/R]

Although the European gas benchmark has fallen slightly from its peak, it is up over 350% for this year.

Russia supplies around a third Europe’s natural gas. However, Russian officials stated that they are willing to pump more. They also suggested that Europe could reduce its gas shortage and hot prices by approving the Nord Stream 2 pipeline project.

Russia’s-led pipeline that will increase Russia’s export capacity via the Baltic Sea to Germany by doubling its current level, stated Monday that it has taken another step in preparation for the start up.

The approval for operations may take several months. However, the United States, along with some European countries, are against the proposal. They fear it could make Europe more dependent on Russian energy.