China rust-belt province warns of more power shortages in energy crisis

Commodities13 minutes ago (Oct 11, 2021 02:55AM ET)

(C) Reuters. FILE PHOTO: A chimney of a China Energy coal-fired power plant is pictured in Shenyang, Liaoning province, China September 29, 2021. REUTERS/Tingshu Wang

BEIJING (Reuters) – China’s largest provincial economy in its northeast rust belt warned of worsening power shortages on Monday, despite government efforts to boost coal supply and manage electricity use in a post-pandemic energy crisis hitting multiple countries.

China’s Liaoning province issued its second-highest level power shortage alert on Monday, the fifth in two weeks, warning the shortfall could reach nearly 5 gigawatts (GW).

Liaoning has the biggest economy and consumes the most power of the three provinces making up China’s rust-best industrial region. It has been suffering widespread power cuts since mid-September. A level two power shortage alert indicates a demand gap of 10%-20% of total power demand.

The rebound in global economic activity as coronavirus restrictions are lifted has exposed shortages of fuels used for power generation in China and other countries, leaving industries and governments scrambling as the northern hemisphere heads into winter.

“The biggest power shortage could reach 4.74 gigawatts (GW) on Oct 11,” a notice issued by the Liaoning Provincial Industry and Informatization Department said.

An order to curb power use had been put in place from 6 a.m. (2200 GMT on Sunday), it said.

The province also issued level two power crunch alerts for each of the last three days of September, when the daily power supply gap reached as much as 5.4 GW, leaving hundreds of thousands of households without electricity and forcing industrial plants to suspend production.

The power shortages follow tightening supply and sky-rocketing prices for coal, used to generate more than 70% of electricity in the region. Wind farms have also been idled due to slow wind speeds. Wind power made up 8.2% of Liaoning’s power generation in 2020.

Last week, China’s top two coal mining regions, Shanxi and Inner Mongolia, ordered more than 200 of their mines to expand production capacity and prioritise coal supply to power plants in northeastern provinces, including Liaoning.

Analysts and traders, however, expect coal output will still fall short this winter, and China would still have to cut industrial power consumption by about 12% in the forth quarter.

China’s thermal coal futures rose 8% to hit a daily upper-trading limit shortly after trade started on Monday.

Moody’s (NYSE:MCO) Investors Service in a report said: “China’s electricity cuts will add to economic stresses, weighing on GDP growth for 2022. And the risks to GDP forecasts could be larger as disruptions to production and supply chains feed through.”

China rust-belt province warns of more power shortages in energy crisis

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