China’s power crisis looks set to spur it to import more coal from a wider range of producers, putting it into competition with European and Indian buyers that are also snapping up more of the dirtiest fossil fuel.
More than two-thirds of China’s electricity comes from coal-fired plants and, while more than 90% of the fuel it uses is mined locally, it’s difficult to raise local output at short notice. Looking offshore is the easier option, but that’s been complicated somewhat by Beijing’s decision to ban imports from Australia — the world’s second-biggest exporter — late last year.
It isn’t easy to ramp up local coal supply, given the low investment in new mines in recent years, Bloomberg Intelligence analyst Michelle Leung said in a note. Over-mining is also strongly prohibited amid safety concerns, she said.
See also: China’s Coal Rally Risks Making Its Energy Crunch Much Worse
Instead, China is likely to try and increase purchases from traditional sources. Jilin province will seek more coal from Indonesia, Russia and Mongolia to ensure power supply and heating, Governor Han Jun said in a statement.
Asia’s largest economy could also look farther afield to coal exporters like South Africa, Colombia, the U.S. and Canada, putting it into competition with buyers in other parts of the world and adding more impetus to global price rallies. European electricity producers are snapping up coal as a shortage of natural gas forces utilities to burn it to cope with their own power crunch, while India is also running low on inventories of the fuel.
“Given the coal shortage in the country, we can expect China to ramp up its buying activity and most of it is likely to come from Southeast Asian markets due to proximity,” said Abhinav Gupta, a dry cargo research analyst at Braemar ACM Shipbroking. “Most of these coal producers are at peak capacity, which may tighten the coal market and push up prices.”
Beijing could of course decide to ease the ban on Australian coal imports, although that may not be politically palatable. BI’s Leung doesn’t think it’s likely, although Ralph Leszczynski, head of research at shipbroker Banchero Costa & Co., reckons it’s a possibility. “Soon the Chinese government might be forced into easing the ban on Australian coal, as that would allow more coal to be imported and ease some pressure on domestic coal prices,” he said. – Bloomberg
Why news media is in crisis & How you can fix it
India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.
But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.
ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.