The energy crisis in India and China helping to revive coal seems to be easing for now

Supply Coal, the major source of electricity generation in China and India, has begun to rise again after governments pressured miners to rapidly increase production and increase imports, prompting power plants and major industrial consumers to begin rebuilding reserves. got permission.

Only a handful of provinces in China still face major power cuts as a result of tight fuel supplies, down from about 20 regions in mid-October, while spot electricity prices in India plummeted to address power shortages. I have come.

“Both countries face some risks in winter supplies, but the shortfall has subsided,” said Jizhou Zhou, Washington-based managing director of Global Power & Renewables at IHS Markit.

Global coal prices, which had soared to a record shortfall in supply, spurred profits by miners including Glencore Plc, the China Shenhua Energy Co., in recent weeks. High-quality thermal coal at the port of Newcastle in Australia – a benchmark in Asia, the region’s biggest market for the fuel – has fallen by more than a third from last month. Thermal coal futures in China have lost nearly 50% since the dramatic increase since mid-October.

The change in the region’s energy supply comes after an onslaught of government interventions. Both China and India encouraged state-backed miners to ramp up coal production. Authorities in Beijing have also taken steps to limit fuel prices, eliminate fixed rates for electricity, curb fuel exports and increase purchases of gas and diesel from abroad.

The race to add more fossil fuels has also focused on a rebound in global greenhouse gas emissions this year, and on the enormous challenge of India and China to overhaul their energy systems and meet emissions reduction targets. which he has highlighted in recent times. United Nations COP26 Climate Summit.

China’s daily coal production has risen by more than 1 million tonnes to 11.67 million tonnes in recent weeks and will likely exceed the government target of 12 million tonnes per day. The ramp-up is exceeding expectations, and meaningfully narrowing the supply deficit, Morgan Stanley analysts including Sarah Chan said in research notes this week.

Coal reserves at India’s power stations rose to 11.2 million tonnes on Tuesday, up from 7.2 million tonnes last month. Major industrial consumers, who had limited coal supplies as authorities prioritized power stations, are also seeing an improvement in conditions.

Chief executive officer Sunil Duggal told reporters on an earnings call that the power stations of metal producer Vedanta Ltd had coal stocks for four to five days as of last week, which was equivalent to a day’s supply at the peak of the crisis.

“The power shortage is looming. Everyone is ramping up their coal production. The pace has been pretty impressive,” said Michelle Leung, an analyst at Bloomberg Intelligence.

The crisis had begun as a post-pandemic rebound in industrial activity increased demand for electricity, as did the supply of coal in the two top consuming countries. Production in India was crippled as heavy rains flooded major production centers, while China is reducing capacity and implementing stringent safety standards that reduce production rates.

Nevertheless, the challenges continue. India’s coal minister Pralhad Joshi has asked state-owned mining company Coal India Ltd to ensure that stocks at power plants reach an average of 18 days of fuel by the end of this month, up from six days’ supply till Tuesday. is more.

According to AS Mehta, president of the Indian Paper Manufacturers Association and director of JK Paper Ltd, one of the country’s largest suppliers, paper producers are running with less than half their coal reserves. He said though operations have not been disrupted, companies faced a “big impact” on costs due to the need to compete in Coal India auctions or turn to costlier imports.

In China, some utilities have not completed winter recharge and have insisted that only limited spare supplies are available. Many industrial sectors, which are large energy users, continue to cut electricity supplies, or face high electricity costs.

According to the country’s Meteorological Office, the temperature may drop by eight to 10 degrees Celsius in the coming days due to cold. The central and eastern regions are also likely to remain cooler in January and February than a year ago as a result of the La Nia event.

“Policy measures are mitigating the risk of power shortages,” said Lara Dong, head of IHS Markit’s Greater China Power and Renewable Research. It remains to be seen whether the risk can be completely eliminated during this winter. Is.”