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World’s Largest Coal Exporter Warns Of Energy Crunch, Imposes Export Ban
World’s Largest Coal Exporter Warns Of Energy Crunch, Imposes Export Ban
Chinese coal futures rose on Tuesday on Indonesia’s export ban over the weekend. Indonesia is the largest exporter of dirty fossil fuel, stoking fears of supply woes as the Northern Hemisphere winter is underway.
Bloomberg Intelligence notes ever since China suspended coal imports from Australia in 2020, Indonesia has become an important source, making up 70% of China’s total thermal coal imports.
Indonesia’s export ban sent the most active coal contract on the Zhengzhou Commodity Exchange soaring as much as 6% on Tuesday.
On Monday, Indonesia’s state utility provider warned the country was facing a “critical period” of supply woes. The export ban will enable power plants to restock domestic coal supplies to avoid rolling blackouts.
“The move could potentially have knock-on effects in China and India, which are the usual destinations for Indonesian coal,” said Warren Patterson, head of commodities strategy at ING.
China has increased domestic production in recent months ahead of winter. Chinese coal miners should benefit from Indonesia’s disruption as prices and sales increase.
Indonesia’s export ban will only last through January but could slash global seaborne supply by 45%. Indonesia is the largest exporter of coal in the world.
Coal prices in other regions have received a boost. Taking a look at the US, Peabody Energy Corporation, the largest private-sector coal company globally, shares jumped 12% on Monday.
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China Coal Prices Soar To Record As Winter Freeze Spreads Cross The Country
China Coal Prices Soar To Record As Winter Freeze Spreads Cross The Country
One week ago we discussed why the “worst case” scenario for China’s property crisis is gradually emerging; to this we can now add that China’s worst case energy crisis scenario is also about to be unleashed as cold weather swept into much of the country and power plants scrambled to stock up on coal, sending prices of the fuel to record highs.
Electricity demand to heat homes and offices is expected to soar this week as strong cold winds move down from northern China, according to Reuters with forecasters predicting average temperatures in some central and eastern regions could fall by as much as 16 degrees Celsius in the next 2-3 days.
Shortages of coal, high fuel prices and booming post-pandemic industrial demand have sparked widespread power shortages in the world’s second-largest economy. Rationing has already been in place in at least 17 of mainland China’s more than 30 regions since September, forcing some factories to suspend production and further disrupting already broken supply chains.
On Friday, the most-active January Zhengzhou thermal coal futures closed at a record high of 2,226 per tonne early. The contract has risen almost 200% year to date.
China’s three northeastern provinces of Jilin, Heilongjiang and Liaoning – also among the worst hit by the power shortages last month – as well as several regions in northern China including Inner Mongolia and Gansu have started winter heating, which is mainly fuelled by coal, to cope with the colder-than-normal weather.
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