page_banner

Global Energy Crunch Leaves China Facing More Power Shortages

Author:Site Editor     Publish Time: 09-29-2021      Origin:Site

China is staring down another winter of power shortages that threaten to upend its economic recovery as a global energy supply crunch sends the price of fuels skyrocketing.

The world’s second biggest economy is at risk of not having enough coal and natural gas — used to heat households and power factories — despite efforts over the past year to stockpile fuel as rivals in North Asia and Europe compete for a finite supply. Demand for heating will jump when temperatures turn colder over the next few months, which could trigger power rationing similar to those seen last winter and over the summer.

An energy deficit and sky-high prices could wreak havoc on Chinese industries, exacerbating faltering economic growth after stringent virus controls cut consumer spending and travel. In a worst case scenario, households may be unable to stay warm during bouts of frigid weather, although analysts say the government would sacrifice factory output to keep residential homes supplied.

 04d7fc5dbGlobal Energy Crunch Leaves China Facing More Power Shortages

 

“It is likely that some provinces in southeastern China will encounter another wave of power shortages during the coldest days,” BloombergNEF analyst Hanyang Wei said by email. “Coal fuel supply has been tight throughout 2021 summer, and is not yet getting eased.”

Energy prices from Beijing to London have soared as economies emerge from the pandemic, boosting demand just as supplies are falling short. The global rally is expected to hit a fever pitch this winter when demand in the northern hemisphere peaks, which risks derailing the global economic recovery and fueling inflation.

Earlier this week, Goldman Sachs Group Inc. nearly doubled its price forecast for the Asian coal benchmark from October to December. Part of the reason is a competing power plant fuel — the North Asian spot rate for liquefied natural gas has jumped five-fold in the last year and is trading at the highest seasonal level on record.

“If coal and gas prices remain at high levels during the upcoming winter, the risk of a power crunch will be high,” said Lara Dong an analyst at IHS Markit Ltd.

Cutting Production

China is already cutting power to factories to meet President Xi Jinping’s energy efficiency and pollution reduction targets, and a looming power crisis could exacerbate shutdowns as China heads into winter. China typically curtails electricity to industries first to ensure residential supply.

Aluminum has been the biggest victim of power curbs among metals because its production requires huge volumes of electricity, with prices touching $3,000 a ton earlier this week for the first time in 13 years.

74cb9f7c0e88465828b8f21a200b48c

To be sure, the effort to ration electricity to some key industries could help curb demand this winter, cushioning the potential power shortfall.

The looming crisis comes despite Beijing’s demand that utilities get better prepared to ensure supply, especially after they were caught off guard last year by a sudden cold blast. Some LNG importers were purchasing shipments for winter from the spot market in March, much earlier than normal, but they’ve significantly rolled back their procurement plans after prices spiked. Authorities also say they are speeding up the accumulation of coal stockpiles. 

Chinese utilities are beginning to forgo spot purchases of LNG, as they’d make a loss if they sold it into the lower-priced domestic market. However, extreme cold weather or shortfalls from Central Asian pipeline flows may force China’s gas suppliers to return to the market to cover winter peak demand, according to Miaoru Huang, a research director at Wood Mackenzie Ltd.

Even if China is able to secure enough fuel to power its economy, high costs may be too painful for some to swallow. Several power companies, which typically sell electricity at set rates not tied to fuel costs, last month asked Beijing’s city government to pay more in order to ensure winter supplies.

Industries that buy gas and coal directly may be impacted as well. “Factories would rather close down in the winter if energy is unaffordable,” said Wang Xiaokun, a senior gas analyst with the Chinese consultant Great Gas.

Quick Links

CONTACT US

Mail:  info@lith-tec.com
Tel:+86-755-23772509
Mobile:+86-15013751033
Fax:86-755-23772509

    

LEAVE YOUR MESSAGES

Inquire Basket ( 0)
0