Few countries will escape higher energy prices following the invasion of Ukraine. But at least it is unlikely that China will suffer from disruptions in coal supply. New price controls announced this week to slow inflation are a sign of the country’s growing reliance on black material.
Russia is a major coal supplier to the world, exporting about 200 million tons annually. Europe is one of its major customers, led by Germany, Belgium and the Netherlands. The main importers in Asia are Japan, Vietnam, Australia and Indonesia.
If customers respond to sanctions and political risk by refraining from Russian coal, supply residues may be additional options for China. So far, it has not condemned Moscow, bypassing the questions of whether Russia’s attack is an invasion. This could help Beijing’s plans to control coal prices – a crucial goal. China has struggled with inflation and power outages in the past year.
China announced this week that it will limit the price of coal in its largest mining areas to control rising prices, and set the range for thermal coal in key mines between Rmb320 ($ 50) and Rmb570 ($ 90) per tonne.
The regulator will limit prices significantly below the national price ceiling of Rmb700 per tonne set earlier this month. This is supposed to be a continuous reversal of the year-long rally of the sector, which was fueled by coal that went back into fashion to address power shortages. Shares of local mining company Yankuang Energy Group more than tripled in the past year.
Shares of local miners fell on Friday. Shares included Yankuang, China Shenhua Energy and China Coal Energy. Other losers from the new policy are energy-intensive local industries like steel producers. These sectors are expected to soon lose access to affordable electricity tariffs. In contrast, green energy stocks like China Datang Corp. Renewable Power and China Resources Power have risen, in anticipation of higher demand for renewable energy.
China is once again increasing its dependence on coal. But as price quotas bite, investors need to move in other directions.
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China/coal: world’s biggest consumer will not suffer from disruption to Russian supplies Source link China/coal: world’s biggest consumer will not suffer from disruption to Russian supplies