Power squeeze hits China, global supply
By Reuters | October 19th 2021
Power shortages helped drive down China’s economic growth to its slowest in a year, while surging coal prices on Monday threaten more pain for Chinese industry and global supply chains.
Companies in Europe have trimmed outlooks amid global bottlenecks, while European gas prices, still more than 350 per cent higher than at the start of 2021, have forced more power supply companies across the region to buckle.
The Czech Republic’s energy regulator took the exceptional step of asking suppliers to provide reassurances that they could supply power to homes and companies after another of the country’s electricity and gas groups halted supply.
Suppliers in other European markets, including Britain, have also folded in recent weeks because of the energy price surge.
In Asia, power provider Ohm Energy said on its website that it had exited the retail electricity market in Singapore on Friday, the third company to do so in recent weeks. To ease China’s crisis, Beijing has taken a raft of steps to boost the output of coal, which fuels about 60 per cent of its power plants. But data on Monday showed those steps were taking time to feed through while power demand continued to surge.
China’s coal output was 334.1 million tonnes last month, down from 335.24 million tonnes in August and 0.9 per cent lower than a year earlier, official data showed.
That means September output averaged 11.14 million tonnes a day, Reuters calculations showed, compared to figures China released last week saying daily output was more than 11.2 million tonnes, only slightly higher despite Beijing’s efforts.
“The Chinese government is losing the battle to control soaring coal prices,” said Alex Whitworth, head of Asia Pacific power and renewables research at Wood Mackenzie.
“Despite efforts to increase coal supply, output fell in September due to weather, safety and logistics challenges. Neither has China succeeded in reining in booming power demand.”
Data showed power constraints contributed to slowing growth in China in the third quarter.
The world’s second-biggest economy grew 4.9 per cent, its slowest pace since the third quarter of 2020 and down from 7.9 per cent in the second quarter.
Shortages of domestic coal have driven fuel prices for Chinese power generators higher, causing unprofitable firms to ration power to industrial users and forcing some factories to suspend production, disrupting global supply chains. European companies are among those to feel the pinch, with the energy crunch adding to challenges, including a shortage of memory chips and a lack of shipping containers.
Dutch health technology firm Philips is the latest to trim its outlook for sales and profit growth in 2021, saying a global shortage of electronic components had hit third-quarter earnings. It was also hit by a recall of respiratory devices.
“Supply chain volatility has intensified globally,” CEO Frans van Houten said. “We expect this headwind to continue in the fourth quarter.”
Fuel prices remain sky-high with oil trading near three-year highs on Monday above $85 a barrel and up more than 60 per cent this year.
The European gas benchmark may have fallen from this month’s peak but is still up more than 350 per cent this year.
Russia, which supplies about a third of Europe’s gas, has said it is prepared to pump more, but Russian officials have also said Europe could ease its supply crunch and red-hot prices by giving a green light to the Nord Stream 2 gas pipeline project.
The Russia-led pipeline, which will double Russia’s piped export capacity to Germany via the Baltic Sea, said on Monday it had taken a further step to prepare for the start-up.
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