China’s coal prices hit record highs, early winter cold adds to energy woes

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BEIJING – China’s energy crisis deepened on Friday as cold weather hit much of the country and power plants scrambled to stock up on coal, pushing fuel prices to record highs.

Demand for electricity to heat homes and offices is expected to rise this week as strong cold winds recede from northern China. Meteorologists predict that average temperatures in some central and eastern regions could drop by as much as 16 degrees Celsius in the next 2-3 days.

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

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Zhengzhou’s most active thermal coal futures in January hit a record 1,669.40 yuan ($ 259.42) per tonne in the early hours of Friday. The contract has increased more than 200% so far this year.

The three northeastern provinces of Jilin, Heilongjiang and Liaoning, which are among the hardest hit by power shortages last month, and several northern regions of China, including Inner Mongolia and Gansu, have started to warm up in winter, which is It feeds mainly on coal, to cope with the cold. -climate than normal.

Beijing has taken a number of measures to contain increases in coal prices, including increasing domestic coal production and cutting power to energy-hungry industries and some factories during peak demand periods. It has repeatedly assured users that the power supply will be assured for the winter heating season.

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But the power shortage is expected to continue early next year, with analysts and traders forecasting a 12% 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 as much as 20% from October base levels. 15, allowing power plants to pass more of the high generation costs to commercial and industrial end users.

Steel, aluminum, cement and chemical producers are expected to face higher and more volatile energy costs under the new policy, putting pressure on profit margins. Thursday’s data showed inflation at factory doors in September hit a record high.

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

China is not the only nation struggling with energy supply, which has led to fuel shortages and blackouts in some countries. The crisis has highlighted the difficulty of reducing the world’s economy’s dependence on fossil fuels, as world leaders seek to revive efforts to tackle climate change in talks next month in Glasgow.

China will strive to reach carbon peaks by 2030, Vice Premier Han Zheng said in a video message at Russia’s International Energy Week Forum, according to the state-run Xinhua news agency on Thursday night.

He also said that China and Russia are important forces leading the energy transition and that they should cooperate and ensure the smooth progress of major nuclear power projects and oil and gas pipelines.

($ 1 = 6.4351 Chinese yuan)

(Reporting by Shivani Singh in Beijing; additional reporting by Aizhu Chen, Muyu Xu and the Beijing newsroom; edited by Kim Coghill)