The cold keeps China’s coal prices high, and the power squeeze intensifies factory inflation. Reuters

© Reuters. File photo: On September 29, 2021, a truck transports coal at a coal-fired power plant in Shenyang, Liaoning Province, China. REUTERS/Tingshu Wang/File Photo

Authors: Muyu Xu and Shivani Singh

BEIJING (Reuters)-As cold weather is sweeping northern China and power plants reserve fuel to ease the energy squeeze, which is fueling unprecedented inflation at factory gates, China’s coal prices remained near historical highs on Thursday.

Due to coal shortages, fuel prices at record highs, and post-pandemic industrial demand booming as they shift to more environmentally friendly fuels, China’s power crisis continues to expand, causing many factories to stop production, including many supplying Apple (NASDAQ: Stock Code: Nasdaq stock code: ).

China’s official data on Thursday showed that soaring energy prices pushed the producer price index (PPI) to its highest level in at least 25 years in September, up 10.7% year-on-year.

Cold winter weather may worsen the situation.

The China National Meteorological Center predicted on Wednesday that strong winds in most parts of China this week could raise the average temperature by as much as 14 degrees Celsius.

Chart: The temperature in North China is lower than normal, boosting heating demand under the power shortage-https://fingfx.thomsonreuters.com/gfx/ce/lbpgnobnyvq/BeijingTempsOct132021.png

The three northeastern provinces of Jilin, Heilongjiang, and Liaoning – which were most affected by power shortages last month – and several areas in northern China, including Inner Mongolia and Gansu, have begun coal-fired winter heating in order to cope with more than normal weather. Colder.

Beijing has taken a series of measures to curb the rise in coal prices, including increasing domestic coal production, power rationing from factories, and ensuring energy supply during the winter heating season. [B9N2QE019]

Earlier this week, China took the boldest step in its decades-long power sector reform, expressing that it would allow coal-fired power plants to pass on high power generation costs to commercial and industrial end users through market-driven electricity prices.

Beijing has been working hard to reduce its reliance on polluting coal power to support cleaner wind, solar and hydropower.

“Ensure people are warm and keep the business running-it’s obvious, of course you need to do it. Even as an environmentalist, you don’t want to be at risk of letting society fight the climate transition,” Dimitri De Boer Said, the Chinese chief representative of ClientEarth, a European environmental consulting company. “But this should be combined with the deployment of renewable energy as soon as possible to avoid similar situations in the future.”

Local governments in Shanxi and Inner Mongolia, China’s major coal-producing regions, have ordered about 200 coal mines to increase production. However, flooding in Shanxi, a major coal-producing country, has worsened the supply outlook. Analysts expect power shortages and rationing to continue until early next year.

Banks are providing loans to coal mines to support increased production. A newspaper backed by the People’s Bank of China reported on Wednesday that Shanxi Group, located in China’s largest coal mining center, has received 1 billion yuan ($155.3 million) in bank loans to restore operations from the flood.

An official from the National Energy Administration said at a press conference on Wednesday that daily coal production has reached the highest level since February, exceeding 11.2 million tons, and the average coal inventory of its power plants can support about 15 days of use. [L1N2R90M0]

Official data on Wednesday showed that China’s coal imports last month rose to the highest level this year.

Since last month, more than half of mainland China managed by State Grid (https://graphics.reuters.com/CHINA-POWER/jnvweyzazvw/chart.png) have implemented energy saving and consumption reduction.

Illustration: China Electricity Distribution Map-https://fingfx.thomsonreuters.com/gfx/ce/egpbkmmykvq/Chinamonthlycoalimports.png

Earlier Thursday, the most active January thermal coal futures in Zhengzhou rose 3% to 1,608.8 yuan per ton. The contract’s trading price is close to the record high set on Wednesday and has risen by more than 200% so far this year.

Chart: Global coal prices have soared due to strong electricity use and tight supply in China-https://fingfx.thomsonreuters.com/gfx/ce/zjpqkekmlpx/WorldCoalPrices.png

($1 = 6.4392 renminbi)



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