China has ordered Inner Mongolia and Shanxi provinces, its largest coal-producing regions, to boost their combined production capacity to more than 160 million tons/year. At the same time, the country’s cabinet also said that coal-fired power utilities would be allowed to hike prices by up to 20% from base rates or more for energy-intensive sectors. The move comes as the world’s second-largest economy battles against its worst power crunch in years.
An official with the Shanxi provincial government said 98 mines had been ordered to boost their annual output capacity by 55.3 million tons through the rest of the year. The province will also allow some 51 coal mines to continue production in the fourth quarter, although they have reached their maximum annual production levels.
Meanwhile, 72 Inner Mongolian coal miners were notified that they could immediately operate at higher capacities, provided they ensure production safety. These mines had an authorised capacity of 178.45 million tons/year, but the notice asked them to increase that by around 98.35 million tons.
State media reported that the power price hike is aimed to discourage excessive power usage, adding that prices charged on residential consumers, agricultural users, and public welfare initiatives would be kept stable. Thermal coal futures in Zhengzhou settled up 2.2% at CNY1,333 ($207) per ton on Friday, near its record high of CNY1,408 seen at the end of September.
Prices of other power-generating fuels such as fuel oil, methanol, and LPG have also increased. All of which have climbed at least 10% in the past month as power generators scramble for fuels. Soaring energy prices have threatened China’s economic recovery from the COVID-19 pandemic. Goldman Sachs lowered its China GDP growth forecast from 8.2% to 7.8% for this year.
