China has carried out a series of contingency measures in the past few months to prevent coal and power supply disruptions, and curb price spikes amid peak summer demand and surging international prices.
The measures underscore the government’s role in Asia’s generation fuels markets and prices. Steps to boost coal production and inventories will last well beyond the summer months into winter, and ease pressure on LNG demand. More stringent measures can be expected during the coming winter when fuel shortages peak.
Prices
**S&P Global Platts JKM benchmark for spot LNG more than tripled from around $5.50/MMBtu in March to just under $18/MMBtu in the week of Aug. 21-27.
**September thermal coal futures hit an all time high of Yuan 989.8/mt on China’s Zhengzhou Commodity Exchange Aug. 23.
**S&P Global Platts Northeast Asia Thermal (NEAT) Coal Index hit an all-time high of $132.20/mt Aug. 26.
Trade Flows
**S&P Global Platts Analytics expects China to become world’s largest LNG importer in 2021, surpassing Japan by nearly 10%. Total Chinese LNG imports are expected to grow by more than 20% in 2021 versus 2020.
**Over January-July, China’s natural gas imports totaled 68.96 million mt, or 95.09 Bcm, up 24% from a year earlier, customs data showed.
**China’s natural gas demand is forecast to hit a record high 365-370 Bcm in 2021, up 37-42 Bcm, or 11.3%-12.8%, from realized consumption of 328 Bcm in 2020, the National Energy Administration said Aug. 21.
**China’s power consumption hit multiple record highs daily in July, rising 12.8% year on year, and posting a 15.6% increase for the first seven months of 2021, according to National Development and Reform Commission data.
**China’s power generation was above 4,645 TWh over January-July, up 13.2% year on year, but still lagged power consumption growth of 15.6% over the same period, data from the China Electricity Council showed Aug. 18.
**In the first half of 2021, 1,702 TWh of electricity had traded in China’s power trading centers in the first half of 2021, up 41.6% year on year, of which 1,377 TWh had traded via medium and long-term contracts, according to the CEC data.
**China’s coal imports dropped 19.7% year on year in the first half of 2021, while coal output grew 6.4% year on year, the CEC data said.
**The CEC estimates China’s total power generation capacity will reach 2,370 GW by end-2021, up 7.7% year on year. Out of this, coal-fired power capacity will stand at 1,100 GW, non-fossil fuel sources, including solar, wind, hydro, nuclear and biomass, will be around 1,120 GW.
Contingency Measures
**China’s Inner Mongolia Shanxi, Shaanxi, Ningxia and Xinjiang provinces started 15 suspended coal mines with total production capacity of 43.5 million mt/year, or 150,000 mt/day of coal output, the NDRC said Aug. 13.
**Inner Mongolia approved land use for 38 coal mines in Ordos City with total coal production capacity of 66.7 million mt/year, the NDRC said July 30. The province has applied for seven more coal mines, with production capacity of 120 million mt/year and projected output of 3.5 million mt/month, the NDRC said Aug. 11.
**China plans to boost national coal reserves to around 600 million mt, or 15% of annual consumption, of which the government’s dispatchable coal reserve will be no less than 200 million mt and the rest will be stored by companies, adjusted through inventories, the NDRC said July 16.
**The NDRC and NEA agreed to extend trial operations of coal mines for one year and requested local governments speed up license approvals, the NDRC said Aug. 4.
**The NDRC, NEA and the General Department of the National Mine Safety Supervision Bureau issued a notice to encourage coal mines to increase production, the NDRC said July 30.
**On July 29, the NDRC approved a 20% increase in retail electricity tariffs during peak demand hours to improve the power supply.
**The NDRC on July 28 asked major coal producers to prioritize thermal coal supplies to Henan province, mainly to 27 power plants and one coal reserve base, after devastating floods. Coal supplies to other flood hit areas like Hebei province and Yangtze River Delta were also ramped up, the NDRC said.
**The NEA released 128,000 mt of coal reserves to southern China over July 16-18, the NDRC said July 28. On June 27, it announced plans to build up to 200 million mt of deployable coal reserves, with 100 million mt ready in 2021.
**The NDRC issued notices to six major power generation companies to increase coal stocks equivalent to at least seven days of consumption by July 21, Shanghai based Jiemian News reported July 19.
**China will release more than 10 million mt of coal from state reserves, adding to more than 5 million mt already released in past four batches in 2021, the NDRC said July 15.
**In June, regulators visited major coal hubs and trading centers to investigate coal inventories and prices, and crack down on speculation and hoarding.
Source: Platts