China is firing up its dirty coal power plants in an effort to keep lights on across the country. Edward White and Hudson Lockett report for the Financial Times:
China has ordered coal miners to boost production as President Xi Jinping races to combat an energy crisis now threatening to slow the world’s second-biggest economy and force his administration to backtrack on climate change promises.
Energy officials in Inner Mongolia, one of China’s largest coal-producing regions, instructed 72 local miners to expand capacity by 100m tonnes, according to a report by Securities Times, a state-controlled national financial newspaper.
A recovery in the world economy, the shift away from fossil fuels and interruptions to the production of natural gas and coal have combined to unleash a global scramble for energy supplies.
The power shortages in China, which relies on coal for more than half its energy consumption, have already forced high-tech manufacturing factories to halt or reduce operations, affected homes in parts of the north-east and raised fears that critical industries such as food production could be hit.
“Global coal markets have become extraordinarily tight because of multiple supply issues and strong demand,” said Christopher LaFemina, an analyst at Jefferies. “The situation is critical in China and India as coal shortages are affecting their economies. Markets in the US and Europe are also very tight. The current environment is clearly unsustainable.”
Coal prices in China have soared this year, while prices for delivery into Europe hit a record this week and are up more than threefold since January.
A dearth of coal for power generation has prompted China to step up purchases of natural gas, exacerbating a squeeze on supplies of the commodity in Europe and the UK ahead of winter.
Chinese Premier Li Keqiang announced a series of measures to support coal production on Friday, including an acceleration in the construction of new mines and phased tax deferrals for coal-fired power plants.
The energy crunch has piled pressure on the country’s economic planners, who are already grappling with the potential wider fallout from the crisis at Evergrande, the highly indebted property group.
Analysts at Société Générale said they had revised down their third-quarter gross domestic product forecast for the country from 5.5 per cent to 5 per cent, saying “there is simply too much downward pressure on China’s economy at the moment”.
The additional coal from Inner Mongolia is equivalent to almost 10 per cent of the almost 1bn tonnes the region produced in 2020. The country’s top coal producing province of Shanxi told 98 mines to raise output capacity by 55.3m tonnes annually, Reuters reported.
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