The South China Morning Post (SCMP) in Hong Kong reported on the 29th that China is suffering from the worst electricity shortage in 10 years, with coal inventories at major power plants just enough to last the next two weeks.

Citing an analysis by Sinolink Securities, SCMP reported that as of the 21st of this month, the coal stockpiles of major power plants in China were only 11.31 million tons, which could last only 15 days.

It is estimated that the situation may have worsened now that eight days have passed since the date the report was based.
According to regulations set by the Chinese authorities, power plants must have a stockpile of coal that, in principle, can be used for at least 20 days in the off-season.

Sinolink also said that from this month to February next year, China will need 1.85 billion tons of coal for power generation, but it is expected to be short of 222 million to 345 million tons, which is 12-19% of the total. analyzed to be relevant.

“Every September, Chinese power plants start replenishing their coal stocks ahead of the cold winter,” the SCMP said.

The previous day, Chinese state media reported that as of mid-March, at least 20 of China's 31 provinces have implemented power supply restrictions.

Traffic lights are suddenly turned off, and major factories are shutting down, causing chaos.

The gap between China's coal inventory and consumption has widened since April.

Prior to that, the price of coal continued to rise from last January amid limited supply and increased demand, rising from 670 yuan (about 120,000 won) per ton to about 1,100 yuan (about 200,000 won) recently.

Sinolink Securities explained that Chinese power plants, whose profitability deteriorated due to such a surge in coal prices, were not trying to produce enough electricity to meet demand.'

In January-August of this year, China's electricity production increased by 11.3% compared to the previous year, but coal production increased by only 4.4%.

China's annual consumption of coal for power generation is more than 3 billion tons, of which only 7% is imported.

In this situation, China's coal supply and demand situation worsened when China banned the import of Australian coal, which is in a trade dispute in October last year.

Australian coal accounted for about a third of China's coal imports, with good quality and high thermal efficiency and cost-effectiveness.

However, coal from Mongolia and Indonesia, which China has increased its imports by replacing Australian products, is of low quality and low thermal efficiency, so it is predicted that China's electricity shortage will worsen in the future.

Nanhua Futures said in a report on the previous day, "Since the ban on coal imports from Australia, we are suffering from a shortage of 35 million tons of high-quality coal."

China's cut coal production since early 2016, and the number of mines as a result of over-mining, has caused the current severe supply-demand imbalance, the SCMP noted.

In addition, the Corruption Assessment Work in Inner Mongolia, which accounts for a third of China's coal production, also took a toll on coal production, the newspaper explained.

The Chinese government launched an investigation into the Inner Mongolia coal industry-related bribery case last year, and the investigation is ongoing until 20 years ago.

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