fredag 1. oktober 2021

Why China’s power crunch is such a big deal

Local Chinese authorities have abruptly ordered power cuts at many factories in the last week, reflecting a system trying to react to a number of directives from Beijing, and macroeconomic developments. While a few economists have cut their forecasts on China’s GDP growth as a result, others are still waiting to see the scale of the impact. Back in late 2020, China stopped buying coal from Australia, once the Asian giant’s largest source of imported coal. Political tensions between the two countries have escalated after Australia supported an investigation into how Beijing handled the coronavirus pandemic.

Meanwhile, historically cold weather that winter drove up demand for coal. Some cities reportedly restricted electricity use in homes and factories.

Alongside a global surge in commodity prices, thermal coal, the primary fuel for electricity production, saw prices soar by more than 40% over 12 months to around 777 yuan per metric ton ($119.53) in December 2020 on the Zhengzhou Commodity Exchange, according to data from Wind Information.