Form of words:
China’s power crisis is set to prompt it to import more coal from a wide range of producers, putting it in competition with European and Indian buyers who are snatching up even the dirtiest fossil fuels.
More than two-thirds of China’s electricity comes from coal-fired plants and, while more than 90% of the fuel is used locally, it is difficult to increase local production on short notice. Looking offshore is the easy option, but it is compounded by Beijing’s decision late last year to ban imports from Australia, the world’s second-largest exporter.
Bloomberg Intelligence analyst Michelle Leung said in a note that accelerating local coal supplies has not been easy, given the low investment in new mines in recent years. He added that over-mining is also strictly prohibited amid security concerns.
See also: China’s coal rally makes its energy crunch worse
Instead, China may try to increase purchases from traditional sources. Governor Han Jun said in a statement that Jilin province would seek more coal from Indonesia, Russia and Mongolia to ensure electricity supply and heating.
Asia’s largest economy could look far for coal exporters such as South Africa, Colombia, the US and Canada, putting it in competition with buyers in other parts of the world and triggering further global price rallies. Is. European electricity producers are breaking coal The shortage of natural gas forces utilities to burn it to cope with their electricity shortage, while India is also being less on fuel reserves.
Abhinav Gupta, Dry Cargo Research Analyst, Bremer ACM Shipbroking said, “Given the shortage of coal in the country, we can expect China to ramp up its procurement activity and most of it is likely to come from Southeast Asian markets. ” “Most of these coal producers are at peak capacity, which could tighten the coal market and drive up prices.”
Beijing could certainly decide to ease restrictions on Australian coal imports, although this may not be politically favourable. BI’s Leung doesn’t think it’s likely, although Ralph Leszynski, head of research at shipbroker Banchero Costa & Co., believes it is a possibility. “Soon the Chinese government may be forced to ease restrictions on Australian coal, as this will allow more coal to be imported and reduce some of the pressure on domestic coal prices,” he said. – bloomberg
Read also: India’s coal reserves are dangerously low as reserves have dried up, lowest since November 2017
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