China’s power crisis slams factories as the coal lobby warns the problems could last until winter

SHENYANG, China, 30. 2 Economy.

Beijing is scrambling to get more coal to utility companies to restore supplies as the northeast is grappling with the worst power outages in years, particularly in three provinces, Liaoning, Heilongjiang and Jilin, home to nearly 100 million people.

Gao Lai, who runs an industrial laundry in Shenyang, capital of Liaoning, said he was losing money after electricity shortages forced him to rent a diesel generator.

“We can only afford it for four days, but if it takes longer the cost is too high for us to survive,” he told Reuters.

“We are ready to get it working because the country needs it, but if (the current limits continue) in the long run we have to think of a way out.”

The restrictions were triggered by the scarcity of coal, which drives about two-thirds of China’s electricity generation.

Steam coal futures closed Thursday on the Zhengzhou Commodity Exchange up 4.2% after hitting an all-time high of 1,408 yuan ($ 218) per tonne.

The contract rose 96% from July to September due to tight supply and strong demand, the biggest quarterly jump since Q1 2017, prompting the exchange to introduce trading limits.

Separately, official data showed that China’s factory activity declined in September for the first time since February 2020. read more

As of last week, more than 100 companies, from electronic component manufacturers to gold miners, have notified the stock markets of production stoppages. However, some have said they have resumed production in the past two days.

The strain comes when the China Coal Industry Association warned it was “not optimistic” about supplies ahead of winter, the peak demand season, adding that power plant inventories are now “apparently low”.

It called on companies “to go out of their way” to increase supply and focus on selling to smaller, high-energy consumers who have not signed long-term supply contracts.

Although coal production hit a record in August, analysts at the Chinese investment bank CICC said a recent spate of mine accidents has made regulators more cautious in approving production expansions.

They said imports, which fell 10.3% year-on-year from January to August, are unlikely to increase significantly in the remainder of 2021 and more local production needs to be “released”.

SWITCH TO DIESEL

In Shenyang, workers at a steel parts factory that has been closed for the past few days said they had not rented a generator but could do so if rationing continued.

Zhai Junwang, manager of a company that rents stand-alone diesel-powered generators, said buoyant business in recent days has doubled prices.

“Stocks are very limited,” he said, but added that he didn’t expect the situation to continue as most of the small factories that use his generators are losing money.

The government has said that its priority will be to keep households supplied with electricity through the winter, as state-run energy company Sinopec has pledged to increase imports of liquefied natural gas. Continue reading

However, Citi analysts said in a note that they expected the peak winter season electricity shortage to persist for heating, most of it coal-fired.

Experts are pushing for fundamental reforms of the Chinese energy system.

The crisis was not due to supply bottlenecks, but to an inflexible network system, said Zhang Boting from the industrial research group of the China Society for Hydropower Engineering.

“The solution … is not just to increase power generation capacity, but to improve the grid’s ability to balance peaks and resolve the serious discrepancies between energy loads and energy supply,” he said on the group’s website.

($ 1 = 6.46107 Chinese yuan renminbi)

Reporting by Gabriel Crossley in Shenyang and Shivani Singh in Beijing; Additional coverage from Min Zhang in Beijing, Brenda Goh and David Stanway in Shanghai, Aizhu Chen in Singapore and Tom Daly; Editing by Clarence Fernandez

Our Standards: The Thomson Reuters Trust Principles.

.

Leave a Comment