The energy crisis in China is deteriorating dramatically

Heavy rains and floods have increased the number of closed mines in China’s largest coal-producing region, sending prices to record levels and hampering Beijing’s efforts to increase energy supply in the winter.

The floods closed 60 of 682 coal mines in Shanxi Province, a region that produced 30 percent of China’s coal supply this year, further exacerbating the energy crisis, which threatens the country’s economic growth. Heat coal futures reached a new daily record after markets opened on Monday.

Mining disruptions complicate China’s efforts to increase coal production and provide power for the winter heating season. The Energy Council on Friday said it would allow higher electricity prices in a bid to boost production amid rising costs.

The Council also said it would gradually allow all coal-fired energy to be traded on the market instead of subject to regulated prices and encourage increased capacity in skilled coal mines. The Chinese government has asked miners to spare no expense in increasing coal supply and has allowed them to operate at full capacity even after reaching their annual quotas.

Fuel shortages could reduce industrial energy consumption by 10% to 15% in November and December, potentially affecting a 30% slowdown in the most energy-intensive sectors such as steel, chemicals and cement.

Zhengzhou Commodity Exchange coal futures rose 11.6% on Monday to 1408.2 yuan ($218.54) per tonne, a new record for the most active contract of the day.

The power grid could face some relief in the near future as hot weather in cities, including Shanghai and Nanjing, is forecast to cool, with temperatures dropping from about 30 degrees Celsius to 20, according to the China Center for Public Works. meteorological service.

However, the cold wave can be an omen for lower temperatures, which will increase the need for heating in winter. The Chinese Meteorological Administration predicts the La Nina weather model between October and December, which could lead to more frequent and stronger cold waves.

Meanwhile, heavy rain in Shanxi continues. More than 120,000 people have been evacuated, Xinhua reported on Sunday, with 190,000 hectares of crops damaged and 17,000 houses collapsed.

Charts: with permission of Bloomberg Inc.

 Junior Trader Nikolay Petrov


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