China’s energy supplies set for further pressure as cold snap looms, companies urged to increase LNG and coal imports

Chinese Power Plant
Chinese Power Plant

China’s central state planner on Monday called on companies to step up imports of spot liquefied natural gas (LNG) and thermal coal to ensure energy supplies ahead of an expected cold spell.

Demand for natural gas, a key heating fuel for the winter in China’s north, is expected to surge further as cold snap is forecast from Monday to hit large parts of the country’s central, northern and eastern regions, causing temperatures to drop by as much as 10 to 12 degrees Celsius (50 to 53.6 degrees Fahrenheit).

China has reported power squeezes in the provinces of Hunan, Jiangxi and Zhejiang since early December, as an economic recovery, cold weather as well as supply bottlenecks sent power loads at grids to near record highs, the National Development and Reform Commission said.

Power consumptions have in the past few weeks been expanding at 11 per cent over a year earlier, and power loads at 20 provincial grids rising at double-digit pace.

To cope with growing need for power generation amid the cold spell, the agency urged top coal producing regions like Shanxi and Inner Mongolia to expand mining and also called for prioritising rail transport of coal.

From January to November, China consumed 6,677.2 billion kilowatt-hours (kWh) of electricity, more than the annual totals for 2017 and 2018.

This year’s annual consumption is projected to increase 3 per cent from 2019, despite the impact of the coronavirus. China’s power consumption in November alone stood at 646.7 billion kWh, the highest level in 27 months.

Beijing restricted a number of Australian imports, including coal, after Canberra called for an investigation into the origin of the coronavirus, which was first identified in China, early this year.

Cargo ships holding as much as US$500 million worth of Australian coal have been anchored off China’s coast waiting for permission to unload as the row between the two nations shows no sign of easing, Bloomberg reported last month.

Australian coal accounted for about 41 per cent of China’s total coking coal imports last year, and about 25 per cent of thermal coal imports, according to China Coal Big Data Centre, a Shanxi-based think tank focusing on energy issues.

China’s imported thermal coal accounted for about 7 per of domestic supply in 2019, when it mined or imported about 3.2 billion tonnes, according to a note by Nanhua Futures. The country consumed 2.9 billion tonnes of thermal coal last year.

Most thermal coal imported from Australia is used in central, southern and eastern China, particularly in coastal cities, as the cost to ship it north is too high.

Because demand for coal has surged above available supply, coal prices have skyrocketed since October to their highest level since May last year.

Coal imports fell 15 per cent in November compared with a year earlier and were down about 21 per cent from October following restrictions on imports from Australia and Indonesia.

At the same time, some of China’s problems may be a result of its successful recovery from the coronavirus pandemic, particularly in coastal and central regions.

China’s factories have benefited from coronavirus lockdowns elsewhere in the world, with exports in November soaring 21.1 per cent from a year earlier, representing the biggest ever export haul when valued in US dollars.

While China’s export machine has led a surge in electricity demand, the country’s rigid energy planning and allocation system has not helped, analysts said.

Source: South China Morning Post – China’s energy supplies set for further pressure as cold snap looms, companies urged to increase LNG and coal imports

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