Analysts warned that China might face an acute energy crunch during the winter. The country’s state-controlled China Energy News newspaper reported that power plants might struggle to provide electricity this winter as they were unable to buy enough coal amid soaring prices. Officials from those plants said their inventories had fallen. Some of them only have enough coal for about a week. They added that they suffered from deep operation losses, with some of them turning off boilers to save costs.
Skyrocketing gas, oil, and coal prices are rocking the world’s energy market. Electricity prices soared to all-time highs in some European countries, forcing factories to suspend production to avoid losses. In China, power shortages could send millions of households and factories into chaos. This will likely send a ripple effect to the global economy, which is slowly recovering from the COVID-19 pandemic.
Coal accounts for more than 70% of China’s total power generation. However, its prices have been in a rally after Beijing halted imports from Australia. At the same time, domestic production has fallen amid strict safety inspections following deadly mining accidents. Thermal coal futures in Zhengzhou settled at CNY1,057.8 ($164) per ton on Friday, up 76% year-on-year. Spot prices are approaching CNY1,700-2,000 per ton, well above the breakeven level even for China’s most efficient plants.
