China shifts from coal use afflicted the whole world

By Damdul,

China for energy consumption is making a shift from coal to renewables and nuclear power. Though China has a large capacity for coal resources, occasionally China imports quite a number, subject to transportation costs.

Europe for the past few months has faced power cost escalation, there are many other factors that have led to this situation but China shift in energy consumption has affected it the most. This shift of China has major consequences for prices outside its borders.

In Europe, the gas prices are going vertical and coal prices are priced top of the range. There are numerous speculation and complaints coming online blaming some probable causes moreover adding gas storage reduction. The question on renewables, they are variables absence of them would unquestionably make Europe want more gas.

According to Alex Turn bill who was working on China’s coal markets and logistics with ANU, the recent market advancement and the domestic factors led to major changes in imports. This had affected the whole world.

Past five years China’s energy market and global market, particularly LNG and pipeline gas have become progressively consolidated. This was like a bonus for the gas producer as a new crucial customer with massive growth has emerged. Meanwhile, Europe demand has in general been reducing towards a flat over the period.

This can be anticipated that whatever happens in China’s market does not stay in China’s market but id proliferated throughout the world. For instance, if China faces scarcity or superfluity of gas, coal or electricity they proliferate like wildfire across the world as China is a crucial and unpredictable importer of these resources.

The first impact of coal squeeze was on Australia when China shipping to Southern was coming from Northern China leaving no room for import of thermal coal. In 2021 China’s coal inventories started to draw from Northern port to Southern port though it seemed immaterial. The demand for electricity utilization was 14% in April- June and steel output was 21%, coal stock started to depreciate as can be seen below ^[1]

Henceforth, the demand was very high and the supply was very low which had a major impact on the domestic productions and imports. China’s coal production is massively centralised in a few provinces only.

Inner Mongolia and Shaanxi production were very low particularly in the escalating demand for electricity driven by industrial out-turn of metal. Imports were badly afflicted from two crucial suppliers first was Australia for political reasons and Mongolia apparently for covid reasons.

Inner Mongolia was facing some internal anticorruption crackdown problems. Particularly, during the period when the government was talking about greening the economy and commodity imports are usually sources of illegal and unfair gains.

In March we could find Xi making categorical references to anti-corruption measures encompassing the coal sector in Inner Mongolia. The decline of imports and production over this period has led to a scarcity of relatively 30 MT attributable to the forfeited production and another 12MT from Mongolian imports.

China has been the top exporter, has been badly hit and the crucial energy companies Sinopec

Corp and China National Offshore Oil Company (CNOOC) are in leading talks about long-term contracts with U.S. exporters of liquefied natural gas (LNG), ^[2]sources told Reuters.

We can conclude that energy markets are strongly coupled via fossil fuel. The demand for gas is falling which has an impact on Europe. Nuclear and hydro are required with more storage of gas. China provincial corruption has an impact on production. China is charging a premium for supplying gas to Northern Europe this winter.

One thing is quite clear that China is taking advantage of the situation. The transition of the source from coal is proving to be expensive for the world; it is not just the emission of fossil fuel that the world has to pay in addition also to the volatility of the Chinese market.

China has taken measures to control the price rise and the domestic demand, for that they have cut down the supply to power-hungry industries. This problem is faced because China is struggling to achieve carbon peaks by 2030. Though, China is striving to reduce its dependency on coal power. The fact cannot be neglected that coal produces electricity that meets the massive demand of China.