China’s coal prices pushed toward record level as electricity consumption soars amid rising temperatures
- The power load in the eastern province of Zhejiang near Shanghai surpassed 100 million kilowatt-hour on Tuesday for the first time
- Electricity usage also hit records in Jiangsu and the southern region of Guangdong, where temperatures have reached as high as 37 degrees Celsius
A heatwave across some of China’s biggest industrial provinces has pushed local electricity consumption to unprecedented levels, sending thermal coal futures toward record highs.
The power load in the eastern province of Zhejiang near Shanghai surpassed 100 million kilowatt-hour on Tuesday for the first time, the State Grid said in its newspaper.
Usage has also hit records in nearby Jiangsu and the southern region of Guangdong, where temperatures have reached as high as 37 degrees Celsius (99 degrees Fahrenheit).
The excessive demand boosted Chinese thermal coal futures to the highest in two months, briefly topping 900 yuan (US$139) a tonne in early trading Friday. Futures have rallied more than 30 per cent this year, reaching a record in May, amid a supply shortage.
“Southern China has been very hot, and the daily power load is consistently breaking new highs,” said Huatai Futures analyst Wang Haitao. “Although the supply of coal has increased, that’s hard to sustain given the intense draw-down. Some regions are again rationing electricity and issuing warnings about using coal.”
Pressure on the nation’s electricity sources is resurfacing with the onset of summer, which meteorologists have said may be hotter than usual this year.
China’s top economic planner on Friday also vowed a massive build-up of capacity to meet demand and cool prices. China has also considered price caps, but any efforts to boost production at local mines will take time, and the spot market remains especially tight.
Zhejiang’s peak load is equivalent to almost five times the energy produced by China’s largest hydropower station, the Three Gorges.
The province is still highly reliant on coal, with only 30 per cent of its power supplied from renewable sources. Jiangsu’s energy needs are even higher, with the province expected to have a peak load of 125 million kWh this summer.
China’s economy rose 7.9 per cent year on year in the second quarter of 2021
Extreme weather is upsetting the coal market in more ways than just hot temperatures. A rainstorm days ago temporarily halted the road links between major coal sourcing province Shanxi to some neighbouring regions. That forced Henan province to ban exporting its own coal production to other areas, the official Securities Times reported.
Henan also ordered coal producers to report their production and inventories to the government on a daily basis to keep track of supplies and demand, the newspaper said. The government’s concern followed a record power load in Zhengzhou, its capital city, according to the report.
Other commodities also risk being hit by efforts to keep electricity flowing. Aluminium output is likely to come under further pressure as supply curtailments due to electricity shortages persist.
Smelters in the major hub of Yunnan will not restore production as planned after a new round of power rationing due to the hot weather, according to Mysteel.