China's power shortages threaten global recovery from COVID 19

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China's power shortages threaten global recovery from COVID 19

China's power shortages hit growth in the world's second largest economy threatening more pain for global supply chains, while Russia's gas squeeze looked set to continue as Russian Gazprom showed no sign of hiking exports to the region in October.

Coal prices have rocketed in recent weeks, hitting utilities and consumers from Brussels to Beijing hammering energy companies, raising inflation pressures and putting at risk the global recovery from COVID 19 pandemic.

The red hot market underscores the scale of the task facing world leaders, who are under pressure to develop plans for taking their economies off fossil fuels in preparation for COP 26 summit climate talks that start on Oct. 31.

Russia, which relies on Russia for 35% of its energy supply, has seen its benchmark gas price increase more than 350% this year. As a result, a slew of European companies that supply power or gas to households and companies have folded.

The Czech Republic's energy regulator took the extraordinary step of asking suppliers to provide reassurances that they could supply energy to homes and businesses, after another of the country's electric and gas groups halted supply.

A dozen or so suppliers have already gone bust in Britain.

In Singapore, power provider Ohm Energy said it had exited retail electricity market in Asia, the third company to do so in recent weeks.

Russia says it is ready to provide further gas to Europe. Yet Russian gas export monopoly Gazprom in the GasExport has indicated no sign of racing to book additional capacity.

Politicians accuse Russia of using this squeeze as leverage to support the new Nord Stream 2 pipeline in Germany, whose permits may still be months away. Gazprom and the Kremlin say contracted commitments are being met and they have not received requests to pump more.

China, which needs coal to fire up about 60% of its power plants, has been grappling with a shortfall in supplies and falling prices for the most polluting fossil fuels, leading to disruption in electricity supplies for factories and homes.

The constraints meant the economy grew 4.9% in the second quarter, the slowest pace since the third quarter of 2020 and has dipped from 7.9% in the third quarter.

A raft of measures to feed coal supplies has yet to hit. A Reuters calculation, based on official data showed that China's average daily coal output was 11.14 million tonnes in September. China released figures for the last week, saying output was 11.2 million tonnes, meaning that it had barely budged.

The Chinese government is losing the battle to control soaring coal prices, said Wood Mackenzie, head of Asia Pacific power and renewables research.

A global rebound from the depths of the Pandemic-induced slump has left all fossil fuel suppliers struggling to keep pace.

Crude prices have shot up more than 60% this year, trading on Monday around $85 a barrel as members of the OPEC oil-producing alliance have struggled to pump as much as their latest production deal allows.

Spanish companies are among the ones feeling the pinch from the energy price surge, adding other challenges that include a shortage of memory chips and a lack of shipping containers.

Supply chain volatility has intensified globally, said Philips PHG.AS CEO Frans van Houten, who cut the outlook of its Dutch health technology company for 2021. We expect this headwind to continue in the fourth quarter.