China, India could face severe shortages of coal supply this winter

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China, India could face severe shortages of coal supply this winter

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None What the Front Line of U.S. Most major industries in the region, including steelmakers to chemical producers, are expected to continue to face power disruptions through the winter, as fuel supply remains tight and as governments prioritize heating demand from households.

Coal India Ltd. the world s top miner of the commodity, has temporarily stopped deliveries to all customers in the country other than power stations, even as it boosts deliveries from mines.

Markets could barely get by with thermal coal supply this winter, said Wood Mackenzie Ltd.'s Natalie Biggs, head of thermal coal research for Wood Mackenzie Ltd. If we see colder than normal temperatures in the Northern Hemisphere, like we did last year, we could see severe shortages in some areas. China, the largest producer and consumer of petroleum, could boost mine production by an extra 100 million tons in the fourth quarter. Reserves are slowly declining in Indonesia after more than three weeks of daily declines, while Indian - the top exporter - is recovering from rain-soaked slowdown in production.

China and India are the world s top coal producers, while China and India are by far the largest consumers, burning two-third of the world's coal supply combined. Even as mining activity ramps up, global coal production will remain below levels in 2019 and at a time when demand is increasing, according to Biggs.

Safety issues in China, heavy rains in Russia and South Africa and logistics problems in Indonesia and Australia have hampered coal supply all year. Combining with a post-pandemic recovery in industrial activity, this has created an intense shortage that is pushing prices to record levels and has caused blackouts and electricity curtailments.

Indonesia, which had an unusually long and heavy rainy season, has accelerated production and expects to meet an annual target of 625 million tonnes, according to Sunindyo Suryo Herdadi, director of mineral and coal program fostering at the Energy and Mineral Resources Ministry.

In China, monthly output is already about 18 million tons higher than last year and authorities are clearing bureaucratic hurdles to help producers add significantly more volumes, Sun Qingguo, senior safety supervisor with the National Mine Safety Administration, said at a briefing Wednesday. In total, the addition could add an extra 100 million tons of supply to the current quarter.

While that should help China heat homes and keep the economy running smoothly, energy-hungry industries will face power curtailments. Output from sectors like steel and cement could decline 30% through year'end, according to UBS Group AG.

Energy crisis remains a distinct risk over the winter in China and power rationing will be one of the policy measures to address the issue, said Lara Dong, head of greater China power research and renewables research at IHS Markit. Warming demand is expected to decline and temperatures forecast to rise over the weekend in Regions including Inner Mongolia.

During a visit to a facility run by a home production operator in Guangdong province on Thursday, Premier Li Keqiang pledged to help ensure the power supplies for factories. The government has allowed coal miners permission to exceed annual quotas, will allow electricity prices to rise and has moved to limit exports of other fuels and lifted diesel imports.

In India, coal stocks at power plants are rising, although inventories still remain almost 80% lower than a year earlier. Several states are experiencing long outages and spot electricity prices surged this week to a 12 year high. State-run Coal India is continuing to divert supply away from industrial consumers, prompting complaints from sectors including aluminum producers.

The government will do anything to prevent a widespread blackout, even if it means curtailing supplies to some other customers, said Somesh Kumar, leader for power and utilities at EY India.

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