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China Power Generators Told to Stockpile Coal to Avert More Blackouts

Leading power company tells its plants to buy more fuel as millions lose electricity in country’s northeast, amid reports that top government leaders are not happy about the situation

A State Development and Investment Corporation power station is seen by a lake in Tangshan in Hebei province (Aug 2018). Photo: Reuters.

 

Chinese power generators have been urged to stock up on coal to ease an energy shortage that has cut off electricity to millions of homes.

State Power Investment Corp (SPIC), one of China’s top-five power generators, told its plants to boost coal stocks and generate more power for the northeastern provinces at an emergency meeting.

Beijing is scrambling to deliver more coal to utilities to restore supply, as the country’s northeast grapples with its worst power outages in years, particularly the three provinces of Liaoning, Heilongjiang and Jilin, home to nearly 100 million people.

International media are also citing a report that said Vice Premier Han Zheng had told energy companies to make sure there is enough fuel to keep the country running and that Beijing would not tolerate blackouts.

“It is probably a strong signal about how concerned China is regarding keeping industry going, and more importantly, the winter that is just around the corner,” Jeffrey Halley, senior market analyst at OANDA, said.

 

CONTINGENCY PLAN

In response to mandates from the State Council, or cabinet, SPIC urged its subsidiary coal and power producers to prepare contingency plans for winter energy supplies, the firm said on its official WeChat account on Thursday.

“Communications among company-owned coal miners in the northeast region shall be enhanced and production for thermal coal shall be boosted,” SPIC said.

“Every single plant needs to set up its own contingency plan and enhance communications with the state grid.”

SPIC asked its key northeast China-based power plants to set up a daily reporting mechanism to further communications with miners besides SPIC to secure coal.

China’s power curbs were triggered by shortages of coal, which fuels about two-thirds of power generation.

Thermal coal futures closed up 4.2% on Thursday on the Zhengzhou Commodity Exchange, after hitting an all-time high of 1,408 yuan ($218) per tonne, having doubled between July and September.

 

PRICE SURGE

Nearly 60% of the Chinese economy is powered by coal, but supply in the world’s largest coal importer has been disrupted by the pandemic and squeezed by falling imports amid a trade tiff with Australia.

As demand for power from factories in China soared utilities were unable to buy enough fuel after prices surged.

The country’s environmental agenda is further adding to the crisis, with pressure to dampen down coal burning and cap the growth of coal mining after President Xi Jinping pledged his country would become carbon neutral by 2060.

Data released on Thursday showed China’s factory activity contracted last month for the first time since February 2020, when the country was essentially closed by lockdowns as authorities battled the first coronavirus outbreak.

Han’s statement raised concerns that already-high commodity prices could surge further.

The order “to me implies that we are in no way on the verge of a cool-off. Rather it looks like it is going to get even more crazy”, Bjarne Schieldrop, an analyst at SEB said.

 

• Reuters and AFP, with additional editing by Mark McCord

 

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Mark McCord

Mark McCord is a financial journalist with more than three decades experience writing and editing at global news wires including Bloomberg and AFP, as well as daily newspapers in Hong Kong, Sydney and Melbourne. He has covered some of the biggest breaking news events in recent years including the Enron scandal, the New York terrorist attacks and the Iraq War. He is based in the UK. You can tweet to Mark at @MarkMcC64371550.

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