Soaring coal prices and squeezing electricity hit China’s economy and global supply

Power shortages have helped push China’s economic growth to its lowest level in a year, while soaring coal prices on Monday further threaten Chinese industry and global supply chains.

European companies have slashed their outlook amid global bottlenecks, while European gas prices, still over 350% higher than at the start of 2021, forced more electricity distribution companies through the region to flex.

The Czech Republic’s energy regulator took the exceptional step of asking suppliers to ensure they can provide electricity to homes and businesses, after another of the electricity and gas groups in the country has interrupted the supply.

Suppliers from other European markets, including Britain, have also shut down in recent weeks due to soaring energy prices.

In Asia, electricity supplier Ohm Energy said on its website that it left the Singapore retail electricity market on Friday, the third company to do so in recent weeks.

To alleviate the Chinese crisis, Beijing has taken a series of measures to increase the production of coal, which powers about 60% of its power plants. But Monday’s data showed those milestones were taking time to materialize as demand for electricity continued to soar.

Chinese coal production was 334.1 million tonnes last month, up from 335.24 million tonnes in August and 0.9% lower than a year earlier, according to official data.

That means September production averaged 11.14 million tonnes per day, according to Reuters calculations, compared to figures released by China last week, indicating daily production was over 11.2 million tonnes, barely higher despite Beijing’s efforts.

‘LOSE THE BATTLE’

“The Chinese government is losing the battle to control soaring coal prices,” said Alex Whitworth, Asia-Pacific energy and renewable energy research manager at Wood Mackenzie.

“Despite efforts to increase the supply of coal, production fell in September due to weather, security and logistical concerns. China has also failed to curb the surge in demand for electricity.

Data showed that energy constraints contributed to the slowdown in growth in China in the third quarter. The world’s second-largest economy grew 4.9%, its slowest pace since the third quarter of 2020 and down from 7.9% in the second quarter.

Domestic coal shortages have driven up fuel prices for Chinese power producers, forcing unprofitable companies to ration electricity to industrial users and forcing some factories to halt production, disrupting global supply chains.

European businesses are among those feeling the pinch, with the energy crisis adding to challenges including a shortage of memory chips and a lack of shipping containers.

‘WIND WIND TO CONTINUE’

Dutch healthcare tech company Philips PHG.AS is the latest to slash its outlook for sales and profit growth in 2021, saying a global shortage of electronic components has affected third quarter results. He was also affected by a recall of breathing apparatus.

“Supply chain volatility has intensified globally,” said CEO Frans van Houten. “We expect this headwind to continue into the fourth quarter.”

Fuel prices remain very high, with LCOc1 oil trading near three-year highs above $ 85 a barrel on Monday and up more than 60% this year. WHERE

The European gas benchmark TRNLTTFMc1 may have fallen from this month’s high, but is still up more than 350% this year.

Russia, which supplies around a third of Europe’s gas, said it was ready to pump more, but Russian officials also said Europe could ease its supply crisis and scorching prices by giving the green light for the Nord Stream 2 gas pipeline project.

The Russian-led pipeline, which will double Russia’s export capacity to Germany via the Baltic Sea, said on Monday it had taken a new step to prepare for start-up.

Approval to start operations, however, could take months for the project, which the United States and some European countries oppose, fearing it will make Europe even more dependent on Russian energy.
Source: Reuters (Reporting by Kevin Yao, Gabriel Crossley, Muyu Xu and Shivani Singh in Beijing; Maria Kiselyova and Vladimir Soldatkin in Moscow; Bart Meijer in Amsterdam; Jason Hovet in Prague; Jessica Jaganathan in Singapore; edited by Edmund Blair and Jason Neely )


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