China’s Energy Crisis Triggers Coal Demand Surges

Chinese officials are facing pressure to increase coal imports following a severe electricity crisis that has rocked the country’s northeastern industrial heartland. The import is expected to keep electricity in the area running, factories open, and even water supply flowing.

With a power shortage triggered by a lack of coal supply that has crippled most of the industry, the governor of Jilin province called for an increase in the supply of imported coal. The power company association said coal supply was being expanded “at any cost.” Jilin is the hardest hit area in the world’s second-largest economy by the crisis.

News organizations and social media carried reports and posts saying a lack of electricity in the northeast led to blackouts from traffic lights, residential elevators and 3G cell phone coverage, and triggered factory shutdowns. A county-owned company in Jilin even warned that power shortages could disrupt water supplies at any time.

Cities like Shenyang and Dalian – home to more than 13 million people – have already been affected, with disruptions at factories owned by global corporate suppliers, such as Apple and Tesla. Jilin is one of more than 10 provinces forced to ration electricity because power plants are feeling the impact of rising coal prices that they cannot pass on to consumers.

Speaking to a local power company on Monday (27/9), Jilin Province Governor Han Jun said “several sources” need to be prepared to guarantee coal supplies, and China should get more from Russia, Mongolia and Indonesia. Jilin has a population of nearly 25 million people

According to the province’s official WeChat social media account, Han said Jilin will also soon dispatch a special team to secure supply contracts in neighboring Inner Mongolia.

Goldman Sachs estimates that as much as 44 percent of China’s industrial activity has been affected by the electricity shortage, which could potentially lead to a 1 percentage point drop in annual GDP growth in the third quarter, and a 2 point drop from October to December.

A coal-fired power plant complex is seen behind snow-covered ground in Harbin, Heilongjiang Province, China, November 15, 2019. (REUTERS/Muyu Xu)

A coal-fired power plant complex is seen behind snow-covered ground in Harbin, Heilongjiang Province, China, November 15, 2019. (REUTERS/Muyu Xu)

The electricity crisis in the country occurred because it was triggered by a shortage of coal supply, increasingly stringent greenhouse gas emission standards, and high industrial demand that pushed coal prices to skyrocket. China’s thermal coal futures on Tuesday rose 7 percent to hit a record $204.76 a tonne.

The rationing has been imposed during rush hour in many parts of northeastern China since last week, sparking state media reports of power supply disruptions in many cities and sparking concern among social media users in the country.

Jilin Governor Han urged companies to fulfill their “social responsibilities” and “overcome the difficulties” caused by rising coal prices. [ah/rs]

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