China’s ban on imports from Australia exacerbates power crisis
According to Bloomberg, China’s power crisis is driving the impetus to import more coal from a wider range of producers, putting competition with European and Indian buyers that are also purchasing more fossil fuels.
More than two-thirds of China’s electricity comes from coal-fired plants, making it challenging to raise local output at short notice.
Looking offshore is an easier option, but that’s been difficult with China’s decision to ban imports from Australia last year.
Ramping up local coal supply is one option however this is not easy given the low investment in new mines in recent years and over-mining is strongly prohibited due to safety concerns. China is as a result expected to increase purchases from traditional sources. For example, the Jilin province will seek more coal from Indonesia, Russia, and Mongolia to ensure power supply and heating.
“Given the coal shortage in the country, we can expect China to ramp up its buying activity and most of it is likely to come from Southeast Asian markets due to proximity,” said Braemar dry cargo research analyst Abhinav Gupta. “Most of these coal producers are at peak capacity, which may tighten the coal market and push up prices.”
This more recent development is another variable that supply chains have to contend with as we fast approach the final quarter of 2021.