China electricity crisis hits factories as coal lobby warns woes could last until winter

SHENYANG, China, Sept. 30 (Reuters) – Small businesses caught in China’s protracted energy crisis are turning to diesel generators, or simply shutting down, as coal industry officials have expressed fears about the stocks before winter and manufacturing has declined globally. 2 economy.

Beijing is striving to get more coal to utilities to restore supply as the northeast struggles with its worst blackouts in years, especially the three provinces of Liaoning, Heilongjiang and Jilin , which are home to nearly 100 million people.

Gao Lai, who runs an industrial laundry service in Shenyang, the capital of Liaoning, said he was losing money after the electricity crisis forced him to rent a diesel generator.

“We can only afford it for four days, but if it is longer the costs are too high, so we cannot survive,” he told Reuters.

“We are ready to make it work because the country needs it, but if (the power cuts continue) in the long term, we have to think of a way out.”

The restrictions were triggered by shortages of coal, which powers about two-thirds of China’s electricity production.

Thermal coal futures on Thursday closed up 4.2% on the Zhengzhou Commodity Exchange after hitting an all-time high of 1,408 yuan ($ 218) per tonne.

The contract jumped 96% between July and September amid tight supply and strong demand, its biggest quarterly jump since the first quarter of 2017, prompting the exchange to adopt trading limits.

Official data separately showed that Chinese factory activity contracted in September for the first time since February 2020. read more

Since last week, more than 100 companies, from electronics manufacturers to gold diggers, have notified stock markets of production suspensions. However, some said they resumed production in the past two days.

The tension comes as the China Coal Industry Association warned it was “not optimistic” about supplies ahead of winter, the peak demand season, and added that power station inventories were now ” obviously low “.

He urged companies to “spare no effort” to increase supply and focus on sales to small, high-energy consumers who have not signed long-term supply contracts.

Although coal production hit a record high in August, analysts at Chinese investment bank CICC said a recent spate of mining accidents had made regulators more cautious about approving gas expansions. production.

They said imports, down 10.3% on the year between January and August, are unlikely to increase significantly over the remainder of 2021 and that more local production needs to be “released”.


In Shenyang, staff at a steel parts factory closed in recent days said they had not yet rented a generator but could do so if rationing continued.

Zhai Junwang, director of a company that rents stand-alone diesel generators, said the dynamism of business in recent days has led to a doubling of tariffs.

“The stock is very limited,” he said, but added that he did not expect the situation to last as most of the small factories using his generators were losing money.

The government said its priority would be to secure electricity and heating supplies to households during the winter, as state-owned energy company Sinopec has pledged to increase imports of liquefied natural gas. Read more

But Citi analysts said in a note that they expected electricity shortages to persist during the peak winter season for heating, mostly coal.

Experts are pushing for fundamental reforms of the Chinese energy system.

The crisis was not caused by supply shortages but by an inflexible grid system, said Zhang Boting of the China Society for Hydropower Engineering industrial research group.

“The solution (…) is not simply based on increasing electricity production capacity, but on strengthening the capacity of the network to adjust peaks and resolve the serious disparities between energy loads and energy supplies, ”he told the group’s website.

($ 1 = 6.46107 Chinese renminbi yuan)

Reporting by Gabriel Crossley in Shenyang and Shivani Singh in Beijing; Additional reporting by Min Zhang in Beijing, Brenda Goh and David Stanway in Shanghai, Aizhu Chen in Singapore and Tom Daly; Editing by Clarence Fernandez

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