Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

  • Steel mills in China are low on coal inventory amid high demand and a shortage of coal in the domestic market due to restriction on imports from Australia and slow transportation of coal from domestic mines owing to harsh winter, reported local media.

Coal shortage

Peak demand for electricity boosted by robust industrial production for exports and heating requirement for cold winter weather alongwith import restrictions on coal have led to a shortage and increase of coal prices in China. Steel mills have operated blast furnace at high level leading to low coal inventory at most plants. In early-December, key steel producers’ crude steel output rose by 12pc from a year ago and 4.6pc from late-November


Power generation through coal accounted for 62.20pc of China’s total electricity generation in 2019, according to the China Electricity Council data, while Australian coal account for only around 3pc of total coal imports of 265mn mt last year, according to NBS data.


Unsafe mines and recent coal mine accidents along with restriction on coal mining to achieve environmental protection targets in provinces such as Shandong, Shanxi, Hebei, Henan have reduced coal-fueled power generation capacity in China. 


Colder winter

China’s Jiangxi, Hunan and Zhejiang provinces have adopted rationing measures to deal with the power shortage amid colder winter in. On the basis of advance predictions, provincial authorities have asked some industries to reduce consumption of electricity to ensure the balance of power supply for residential heating purposes. Zhejiang has adopted measures to limit power consumption to save electricity as well as reduce emission reduction in certain places in the province. Zhejiang’s electricity generation in early December rose by 9.2pc from the prior year period, while it increased by 19.8pc and it increased increased by 18.4pc in in Jiangxi. 


Expansion of manufacturing activities to support increased export orders is driving the surge in electricity consumption. Many enterprises are running at full utilization levels. Higher industrial demand and residential heating has caused power outages in some provinces restricting production. 


In order to address coal shortages, the Chinese government is working on the construction of two major coal transportation channels the West-to-East and North-to-South Coal Transportation Channel to accelerate the distribution and production of coal through special railway lines and the road-rail connects between major ports and logistics parks. Construction of several large coal storage bases are also being accelerated.

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