Coal crunch sees China's rustbelt exposed to risk of winter power, heat cuts

By Reuters/Meng Meng, Josephine Mason   September 5, 2017 | 01:54 am PT
'Our power plants in northern provinces of Heilongjiang, Liaoning and Jilin have the worst shortages among all of utilities.'

China's northeastern industrial heartland may face winter power and heating cuts after authorities in Beijing spurned requests from provincial providers for help securing coal supplies after two major mines were forced to halt output, utilities warned.

Coal-dependent power in the major manufacturing province of Heilongjiang issued their plea to the National Development and Reform Commission (NDRC) via the state power grid after authorities suspended work at mines in neighboring Inner Mongolia last month, according to documents posted on the website of coal publication

The authenticity of documents was confirmed by a person familiar with the matter, who declined to be identified because he wasn't authorized to speak to media. The NDRC and state grid were not immediately available for comment.

The mines halt is part of concerted efforts by China to tame increasingly severe winter smog in industrial centers. But it also shows Being's war on pollution can roil key industries while sending coal prices sharply higher, both in China and across Asia.

In its response to the request, the NDRC acknowledged the coal shortage but did not offer more supplies, the documents showed, instead calling on the provincial government to ramp up clean fuel output while cutting coal-fired generation from inland power plants.

"We believe Inner Mongolia coal mines cannot restart immediately," the NDRC said in its response. "We kindly ask you(local state grid and power companies) to prepare as early as possible and make sure to send enough electricity to the grid."

It wasn't immediately clear whether the northeast has enough alternative sources of energy to fill the looming supply crunch, but a utility executive said winter supplies could fall short of demand. An electricity and heating shortage in these provinces - with a joint population of over 100 million - would have severe consequences in an area where temperatures can plunge in winter, with an average of minus 14 to minus 30 degrees Celsius.

"Our power plants in northern provinces of Heilongjiang, Liaoning and Jilin have the worst shortages among all of utilities," a senior executive at Datang Group, which has seven power plants in the region, told Reuters in a phone interview.

"In the worst scenario, we might look to curb power production in the winter," the said, speaking on condition of anonymity because he wasn't authorized to discuss the matter publicly. "Both private and large state-run power plants have difficulties finding supply."

While the shortage is regional, its impact is being felt in both Chinese and global coal markets.

Zhengzhou thermal coal futures prices have jumped by 12 percent since July to 635.4 yuan ($97.19) per ton.

Meanwhile Australian Newcastle thermal coal cargo prices, a benchmark for Asia, have jumped by more than 20 percent since July, to over $100 per ton.

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