China’s energy crisis triggers alarm and calls for more coal

  • Jilin Province Governor Urges More Coal Imports
  • Environmental controls, rising prices undermine electricity generation
  • Fears of power outages at traffic lights, 3G networks and factories

SHANGHAI, Sept. 28 (Reuters) – As a severe energy crisis shakes the industrial heartland of northeast China, senior officials face mounting pressure from alarmed citizens to increase coal imports thickly and quickly to keep the lights on, factories open, and even the water supply flowing.

With electricity shortage caused by poor supply of coal paralyzing large sectors of industry, the governor of Jilin province, one of the worst hit in the world’s No. 2 economy, called for an increase in coal imports, while an association of power companies said supply will be expanded “at any cost.”

News organizations and social media published reports and posts saying the power failure in the Northeast had shut down traffic lights, residential elevators, and 3G mobile phone coverage, as well as caused factories to close. A utility company in Jilin even warned that the power shortage could disrupt the water supply at any time, before apologizing for causing alarm.

Cities like Shenyang and Dalian, home to more than 13 million people, have been hit, with disruptions at factories owned by suppliers to global companies like Apple. (AAPL.O) and Tesla (TSLA.O). Jilin is one of more than 10 provinces that have been forced to ration power as generators feel the heat of high coal prices that they cannot pass on to consumers.

Speaking to local power companies on Monday, Han Jun, the governor of Jilin province, with a population of close to 25 million people, said that “multiple channels” need to be established to ensure the supply of coal, and that China should get more from Russia. Mongolia and Indonesia.

Han said the province would also urgently dispatch special teams to secure supply contracts in neighboring Inner Mongolia region, according to the province’s official WeChat social media account.

Goldman Sachs estimated that up to 44% of China’s industrial activity has been affected by power shortages, which could cause a 1 percentage point decline in annualized GDP growth in the third quarter and a 2 point drop. percentage from October to December.

He said in a note posted Tuesday that it was cutting its GDP growth forecast for 2021 for China at 7.8%, from 8.2% previously.

‘AT ANY COST’

The crisis of power has seized As tight coal supplies, tightening greenhouse gas emission standards, and strong industry demand have pushed coal prices to spikes: China’s thermal coal futures rose 7% at 0500 GMT Tuesday at a record 1,324 yuan ($ 204.76) per tonne.

Rationing has been implemented during peak hours in many parts of northeast China since last week, prompting state media reports of power outages in many cities and fueling concern among avid social media users. from the country.

As some candle-operated stores in the northeast and shopping malls closed early, posts on China’s Twitter-like Weibo service expressed concern about water after a utility company in Jilin warned users that power shortages it could affect supplies at any time.

The governor of Jilin, Han, urged companies to fulfill their “social responsibilities” and “overcome the difficulties” caused by the increases in the price of coal.

The Electricity Council of China, which represents the country’s energy providers, said in a note on Monday that coal-fired power companies are now “expanding their procurement channels at any cost” to ensure the supply of heat and electricity in winter.

He said China needs to increase coal production and supply while ensuring safety and environmental protection. More medium- and long-term contracts needed to be signed to increase power plant inventories before winter.

Coal traders noted that finding new sources of imports may be easier said than done.

“Russia has to meet the demand from Europe, Japan and South Korea first,” said a trader based in northeast China. “Indonesia’s export shipments have been held back by the rainy weather in recent months and Mongolia’s exports, mainly by trucks, are small.”

David Fishman, a China energy policy researcher and manager at consultancy Lantau Group, said flaws in China’s pricing system were ultimately to blame for the current shortage.

“In the short term, the only aid policies that make sense are to extract more carbon from the ground, which will surely be an unpopular idea, or to make end users pay more for their energy,” said Fishman.

Lawmakers had previously warned that China needed to build more coal plants to make up for potential power shortages during the 2021-2025 period, but utilization rates at existing plants remain low.

Lauri Myllyvirta, principal analyst at the Helsinki-based Clean Air and Energy Research Center, said Northeast China currently had 100 gigawatts of coal capacity, which would be more than enough to meet demand if plants had the incentive to buy more coal. .

“Not a single region of the grid has reported peak loads that are even close to depleting available generation capacity,” he said.

Reporting by David Stanway; Additional information from Chen Aizhu in Singapore; Edited by Kenneth Maxwell

Our Standards: The Thomson Reuters Trust Principles.

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