Coal price surge, power squeeze hits China's economy, global supply
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[October 18, 2021] By
Kevin Yao, Muyu Xu and Jason Hovet
BEIJING/PRAGUE (Reuters) - 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% 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.
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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
output of coal, which fuels about 60% of its power plants. But data on
Monday showed those steps were taking time to feed through while demand
for power 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% 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.
'LOSING THE BATTLE'
"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%, its
slowest pace since the third quarter of 2020 and down from 7.9% in the
second quarter.
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![](../images/101821PIX/2021-10-18T103055Z_5_LYNXMPEH9H0HQ_RTROPTP_4_CHINA-POWER_small.JPG)
A man walks past a coal-fired power plant in Shanghai, China,
October 14, 2021. REUTERS/Aly Song
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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.
'HEADWIND TO CONTINUE'
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% this year. [O/R]
The European gas benchmark may have fallen from this month's peak but is still
up more than 350% 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 greenlight 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.
Approval to begin operations, however, could be months away for the project
which the United States and some European countries oppose, concerned it will
make Europe even more reliant on Russian energy.
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(Reporting by Kevin Yao, Gabriel Crossley, Muyu Xu and Shivani Singh in Beijing;
Maria Kiselyova and Vladimir Soldatkin in Moscow; Bart Meijer in Amsterdam;
Jason Hovet in Prague; Jessica Jaganathan in Singapore; editing by Edmund Blair
and Jason Neely)
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