'Worst Power Shortage' in China, "Secure Supply by Any Means Necessary" (Comprehensive)

Power Supply Mobilization Order... "All Means Mobilized to Prepare for Winter"
European Natural Gas Prices Hit Record High
Coal and Crude Oil Prices Also Soar
Hydropower Operation Advanced Amid Power Shortage

[Image source=Reuters Yonhap News]

[Asia Economy Beijing=Special Correspondent Cho Young-shin, Reporters Park Byung-hee, Kim Su-hwan] Amid China’s severe power shortage, authorities have reportedly instructed state-owned energy companies in oil, power generation, and coal sectors to "mobilize all means to secure power supply in preparation for winter."

Following this news, prices of natural gas, international oil, and coal surged simultaneously. Concerns are rising that China’s power shortage is shaking the global commodity market.

On the 30th of last month (local time), Bloomberg News cited sources reporting that the Chinese government issued such directives, with Vice Premier Han Zheng, responsible for energy and industrial production policies in China, giving the order.

The sources said, "Vice Premier Han issued these instructions during an emergency meeting earlier this week with senior officials from the State-owned Assets Supervision and Administration Commission and economic policy agencies," adding, "Vice Premier Han stated, ‘No power outage can be tolerated.’"

Natural Gas and Coal Hit Record Highs Consecutively

News of the energy securing order for Chinese state-owned enterprises caused European natural gas prices to surge again, hitting record highs.

The Dutch TTF natural gas futures price, a benchmark for European natural gas trading, rose as much as 14.7% that day, reaching 99.31 euros per MWh. This is more than double the price from a month ago.

Due to the rise in natural gas prices, German electricity futures prices also soared by up to 13%, reaching 133 euros per MWh.

Coal prices are also rising sharply amid worsening demand imbalances.

On the same day, Chinese thermal coal futures at the Zhengzhou Commodity Exchange surged 6.5% from the previous day to 1,393.6 yuan per ton. This is an all-time high and about twice the price from earlier this year.

A senior analyst at SEB forecasted, "China will stake everything necessary to win the coal and natural gas bidding war."

Oil prices are also soaring. On the 28th of last month, Brent crude from the North Sea surpassed $80 per barrel for the first time in three years. West Texas Intermediate (WTI) futures prices at the New York Mercantile Exchange also reached the highest level since October 2018, trading in the $75 range.

Some forecasts even suggest Brent crude could reach $200 per barrel by the end of next year.

According to Bloomberg News, options trading at the London Metal Exchange betting on Brent crude hitting $200 per barrel by December next year has surged sharply.

China in Emergency, Hydropower Production Accelerated

The Chinese government’s emergency meeting on power supply indicates the severity of the situation in China.

According to Chinese media including state-run CCTV, the Lianghekou Hydropower Plant in Sichuan Province held its completion ceremony and began full-scale power production on the day.

Lianghekou Hydroelectric Power Station
[Photo by CCTV]

The dam’s annual power generation capacity is reported to be 11 billion kWh, equivalent to the output of four coal mines producing 4 million tons of coal annually. Originally scheduled for completion around 2023, the dam appears to have been rushed into operation due to the power shortage.

China’s power shortage has been attributed to a recent reduction in coal supply for power generation within the country amid a surge in electricity demand.

On the 29th of last month, the South China Morning Post (SCMP) reported that emergency power measures were issued in 20 out of 31 jurisdictions in China due to the power shortage, describing it as "China’s worst power crisis in a decade."

As the power shortage worsens and signs emerge of greater socioeconomic impacts on the Chinese economy, authorities are becoming increasingly active.

On the same day, Premier Li Keqiang said at a meeting with diplomats from major countries, "The Chinese government will make every effort to maintain economic growth," adding, "We will focus on stabilizing industry and supply chains."

This content was produced with the assistance of AI translation services.