Chinese Coal Miners Promise ‘Do Everything’ To End Electricity Crisis

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China’s largest coal miners have pledged to ramp up production as the country grapples with a worsening energy crisis that threatens to hurt economic growth.

Central government officials this week called on state energy companies to guarantee supplies for this winter at all costs, with instructions coming directly from Han Zheng, the vice premier who oversees the sector.

In response, the country’s major coal producers are now pledging to increase their production as winter approaches. Coal-fired electricity accounts for about 70 percent of China’s electricity.

On its official WeChat account, China Energy Investment Corp, the country’s largest coal miner, said it would “do everything possible” to increase supply and “will strictly implement the country’s demand to ensure the ‘supply “.

Wang Xiangxi, who is the chairman of the company, said it will “strive to achieve full production and make every effort to increase supply” in the fourth quarter.

Meanwhile, State Power Investment Corp said its Inner Mongolia coal mining company will “do everything possible” to secure the supply of coal to northeast China, to ensure power generation. .

“The use of coal for power generation and heating is very important for people’s livelihoods,” he said.

Energy prices have risen around the world as supplies of natural gas and thermal coal, which are burnt in power plants to generate electricity as well as for heating, have struggled to keep up with demand. while major economies have recovered from the pandemic. Europe and Asia are facing increased competition to secure their supplies before winter.

The imbalance has been particularly acute in China, where electricity rationing threatens to worsen the slowdown in the country’s economy. Earlier this week, Goldman Sachs cut its growth forecast for China for 2021 to 7.8% from 8.2%, citing “significant downward pressure” from energy shortages.

However, analysts and coal traders were skeptical of increasing production fast enough to make a difference this winter, with some saying power rationing was the only way to balance the market. “It may take a while to see the impact,” UBS economist Ning Zhang said.

China has struggled to increase the domestic supply of coal to meet increased demand for electricity due to tough new safety measures introduced after a series of fatal accidents and environmental checks.

The country’s electricity demand has grown nearly 15% this year, according to Morgan Stanley, but its national coal supply has only grown by 5% since the start of the year.

At the same time, China has not been able to fall back on sourcing from overseas. It has been unable to purchase Australian coal due to an import ban while supplies from Indonesia, China’s largest overseas coal supplier, have been hampered by persistent precipitation.

Rail and port constraints affected imports from Russia, another supplier. Between January and August, UBS estimates that Chinese imports fell 10.3% year-on-year.

On top of that, soaring gas prices have forced utility companies in Northeast Asia and Europe to switch to coal, increasing competition for supply. Bloomberg reported on Friday that a German power plant had been shut down after running out of coal.

In China, domestic coal prices rose sharply during the summer, from 950 Rmb per tonne in June to 1,100 Rmb in August to over 1,300 Rmb in September, with some trading taking place at 1,700 Rmb per ton, or $ 260, this week. according to Argus Media, a pricing agency.

“Coal remains China’s energy safety net. But this week’s saga demonstrates that it is not only an environmentally unsustainable safety net, it is also insufficient to ensure energy security, ”said Trivium China, a consultancy firm.