[Epoch Times October 05, 2021]At the same time as power cuts across the mainland, liquor stocks also ushered in a wave of rising prices a few days ago. Some analysts joked that it was because there was not enough coal this year and the north could not provide heating. , Can only rely on drinking for warmth, which has brought liquor to rise. Although this is just a joke, it also shows a manifestation of the capital market, that is, coal is in short supply, and its impact on Chinese society is beyond imagination.
China is the world‘s largest coal producer and importer, and its reserves are also the world‘s second largest. It stands to reason that China should not be short of coal for power generation. However, as everyone knows, China is now experiencing an electricity shortage. Originally, under the CCP’s slogan of “cut production capacity” and “carbon neutrality and carbon peaking”, coal was almost thrown out of the stage of history by the CCP. Unfortunately, when China lacks coal and cuts electricity, global energy prices In the skyrocketing, the CCP has to pay more attention to coal again.
However, under the turmoil of power rationing, can the CCP grab coal all over the world? Will it start importing Australian coal again? Dozens of mines on the mainland that have stopped production have resumed production one after another. Can this solve the current coal shortage? Today we will talk about these topics.
In the previous program, we analyzed one of the main reasons for this large-scale power outage in China. It was because of the high coal prices under the “market coal, planned power” mechanism, and the serious upside down of coal and electricity prices. At the same time, the power plant is in a mess. In order to survive, power supply companies everywhere started a trend of blackouts without increasing electricity prices.
As you can see, under the one after another power curtailment actions of power supply companies in various places, many development and reform commissions have begun to loosen electricity prices. According to data from CICC, Ningxia, Mongolia, Shandong, Shanghai, Guangdong and other provinces have successively announced that electricity prices will rise by 10% on the basis of standard electricity prices. The Hunan Development and Reform Commission also issued a notice stating that it will implement a linkage mechanism between industrial electricity prices and coal prices starting in October.
It remains to be seen whether the adjustment effect of such fluctuations in electricity prices, whether the rise in electricity prices can catch up with the rise in coal prices, and whether electricity prices will continue to rise along with coal prices in the future remains to be seen.
According to the estimates of investment bank Goldman Sachs, the current wave of electricity shortages has affected 44% of China’s industrial activities. We know that 70% of China’s electricity comes from thermal power generation. So, as long as coal is sufficient, Wouldn’t it alleviate the electricity shortage?
A researcher at the Energy and Clean Air Research Center in Helsinki said in an interview with Reuters that Northeast China currently has a coal power capacity of 100,000 megawatts. If power plants can buy more coal, they will be able to fully Meet the electricity demand.
Next, let’s look at the supply of coal from both import and domestic mining.
Global energy prices rise, CCP struggles to grab coal
At present, the CCP has also required power plants to expand coal procurement channels “at all costs”, including expanding imports, to ensure heating and power supply this winter. However, this is not easy.
China’s coal importing countries are mainly Indonesia, Australia, Russia, and Mongolia. However, after China stopped importing coal from Australia this year, China further increased its coal imports from Indonesia, even Canada, which has a long distance and long shipping schedule. , The United States, Colombia and South Africa have also become China’s major coal importers.
But now, global energy prices have skyrocketed, coal prices in Australia have reached new highs, and India and Europe are competing with the CCP for coal. Even in areas where coal is traditionally supplied, the CCP may not be able to get coal.
For example, in Europe, due to the increase in natural gas prices, Europe is also facing power generation difficulties. European countries originally planned to phase out coal, but are now restarting coal power generation. Russia, although one of China’s major coal importers, may also protect Europe first. Needs.
At the same time, India, which has just liberalized coal export restrictions, is also facing the problem of tight coal supply.
India is also one of the countries with the largest coal reserves in the world. However, as domestic and international industrial demand surges, India’s coal power has also become tight. It is reported that more than half of the 135 thermal power plants in India have fuel stocks of less than 3 days, which is far below the recommended stock level of two weeks.
In addition, continuous heavy rains have also affected Indonesia’s coal exports, and Indonesia is currently China’s largest coal importer. However, Mongolia’s coal can only be transported by truck, and the transportation volume is limited.
So, what about Australia? Of the 300 million tons of coal imported by China last year, Australia accounted for 78.44 million tons, about a quarter. This year, China only imported 38,500 tons of coke from Australia in July, and imports of other coal types were “zero”.
A few days ago, the “Sydney Morning Herald” mentioned in a report that in order to ease the pressure of high coal prices, China may relax restrictions on Australian coal imports in the short term.
China consumes about 4 billion tons of coal each year, of which domestic production is about 3.7 billion tons and imports are about 300 million tons. Perhaps the CCP believes that Australia’s coal imports account for only about 2%, which is insignificant. Therefore, in the Sino-Australian trade war, the cessation of the import of Australian coal was played as a card. The CCP is in a state of discomfort. Moreover, the current Australian coal price is no longer the price of last year. Therefore, as we said in the program earlier, the CCP is shooting itself in the foot.
According to a Reuters report, global oil, natural gas, coal and electricity prices continue to rise. Recently, coal prices in major exporting countries have also hit record highs. In the past three months, Australian coal prices have risen by about 50%, and Indonesian coal export prices have also risen by 30%.
As the benchmark price in Asia, the price of Australia’s Newcastle high-quality thermal coal has soared to US$203.20 per ton, setting a new high since July 2008.
Goldman Sachs mentioned in the September report that the Newcastle Coal Benchmark Index may reach an average of US$190 per ton from October to December.
As mentioned earlier, the CCP’s current requirements for power plants are “at all costs”. It is very likely that, regardless of the current price of Australian coal, Chinese power plants can only passively accept it. If the CCP has to loosen its policy and import coal from Australia in the next step, it is really like what some people in the industry have said. The CCP, who originally wanted to slap Australia on energy, eventually slapped itself.
Australian coal has high quality, high heat content, low phosphorus and sulfur content. Chinese companies import Australian coal, which not only has advantages in price and freight, but is also more effective for companies to complete the task of “energy saving and emission reduction”.
Moreover, as far as the current situation is concerned, it is believed that the state-owned enterprises in mainland China will not take into account the regulations of state monopoly, and they are likely to make short-term purchases from traders and middlemen. The urgent need will be solved first.
However, although the CCP has difficulty looting coal overseas, there is still another way for the CCP to continue to “dig three feet” at home.
Let’s look at the domestic coal production situation next.
Suspended coal mines and reopened coal prices are difficult to drop
On September 30, the China Coal Industry Association issued a notice stating that the current domestic supply of thermal coal continues to be tight, and it is expected that the prospect of thermal coal supply during the winter peak period is not optimistic. All coal enterprises are required to further improve the ability to guarantee the supply of thermal coal.
Earlier, some insiders said that in addition to the CCP’s previous policy of controlling production capacity, local governments in large coal-producing areas also have the motivation to actively control production and maintain high coal prices. Taking Shanxi as an example, coal companies are the main economy and act as the government. , Are willing to maintain high coal prices, so whether they will listen to the central government and lower coal prices will be a problem. On the other hand, from a cyclical point of view, it will take time for coal prices to fall again, and it will take time to control production capacity to release production capacity.
Let’s take a look at how this wave of coal shortage caused it?
In the previous program, we mentioned that on January 20 this year, a Chongqing government red-headed document announced that Chongqing Centennial Coal Mine had withdrawn from the market. At that time, a source revealed that it was Chen Miner who personally halted the coal mining industry in Chongqing. Behind this was the officials’ consideration of personal careers under the CCP system. After that, Chongqing will transport coal from Shaanxi.
In addition, on January 4 this year, the “Shanxi Evening News” reported that in 2020, Shanxi Province will close and withdraw 32 coal mines in order to resolve excess coal production capacity, reaching 20.74 million tons per year. The report also said that from 2016 to 2019, Shanxi Province has resolved a total of 115.86 million tons of excess coal production capacity per year, and completed the “Thirteenth Five-Year Plan” capacity reduction task one year ahead of schedule. It also mentioned that Shanxi’s “total exit volume ranks first in the country.” And for two consecutive years, it has been incentivized by the State Council’s supervision and notification.”
As a result, within a few months, in April this year, Kaiyuan Securities released an industry report, mentioning that coal supply is tight, and the release of coal production capacity is still subject to policy restrictions from various aspects, including Inner Mongolia’s strict implementation of anti-corruption There are also restrictions on inverted inspections and coal control tickets, as well as Shanxi, Shaanxi, and Inner Mongolia. These major coal-producing areas continue to conduct coal mine security inspections and intensify safety inspections.
In just three or four months, overcapacity, insufficient supply, and safety inspections have become contradictory factors that plague the coal market.
This year, governments at all levels of the Chinese Communist Party are all fearful to “maintain stability” for the centennial celebration of the Chinese Communist Party. Naturally, the Chinese Communist Party does not want any large-scale mining disasters to occur at this juncture, so it will continue to strengthen safety inspections, but this also directly affects coal production. , Then in the case of insufficient supply, coal prices will be pushed up.
Indeed, after the Centennial of the Communist Party of China in July, these overcapacity and safety inspections are no longer a problem, and the wind direction suddenly changed.
In order to increase coal supply, the National Development and Reform Commission of the Communist Party of China notified on July 22 that it encouraged eligible coal mines to nuclear increase production capacity.
A few days later, the Development and Reform Commission of the Communist Party of China issued a message saying that all 38 suspended surface coal mines in Inner Mongolia had resumed production.
At the beginning of August, the Development and Reform Commission of the Communist Party of China issued a message saying that 15 coal mines in five provinces, including Inner Mongolia, Shanxi, Shaanxi, Ningxia, and Xinjiang, were postponed for one year and resumed production, involving an annual production capacity of 43.5 million. Ton.
What about Shanxi Province, where coal production accounts for a quarter of China’s total production?
On September 29, Shanxi Province and 14 provinces, autonomous regions, and municipalities including Hebei, Shandong, Jiangsu, Zhejiang, Fujian, and Guangdong, signed a medium- and long-term coal supply guarantee contract for the fourth quarter to ensure energy supply.
We can see that the CCP’s policy on the coal market is changing day by day, and this is the culprit that disrupts the coal market. And this chaotic policy, in turn, has caught the CCP’s own neck. Even Lu Media himself said that coal prices will hardly peak for a while.
Now, in order to alleviate the contradiction of “market coal, planned electricity”, the solution is to liberalize electricity prices. In order to fill a hole, the CCP has to dig more holes, but in the end, it is the ordinary people who pay the bill.
Institute of Finance and Economics
Planning: Yu Wenming
Written by: Li Chuanxin
Editor: Wei Ran, Yu Wenming
Editing: Songs
Producer: Wen Jing
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