Power play: China in electricity crisis, India snags cheap Aussie coal

Coal ship at sea (fossil fuel)
Image: Shutterstock

Having vowed to cease funding overseas coal projects, China’s President Xi Jinping is now facing a national electricity crisis that has left many homes in the dark and just a fortnight’s worth of coal reserves remaining.

His government says China’s power grid is simply shifting from fossil fuels to renewables, however, it’s clear drought, extreme heat and additional demand due to COVID-19 are creating unprecedented strain on electricity production while the country’s coal reserves are dangerously low.

This week, two-thirds of the country experienced blackouts and rationing. Meanwhile, India—facing a coal shortage crisis itself—has fortuitously snapped up Australian coal that has been stranded inside China for months. In a backflip, China itself is now making a grab for the coal, with Reuters reporting officials were in the process of releasing some of the coal from bonded storage.

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According to Bloomberg, India is purchasing the fuel at a tidy $12 to $15 a tonne discount compared to fresh shipments from Australia, making it some of the cheapest thermal coal relative to its quality on the market.

Indian cement makers and sponge iron plants are among buyers that are using the supplies to bridge domestic shortfalls.

“The development reflects the extent to which China-Australia relations have soured: China is battling a crippling energy crisis that’s set to get worse as winter sets in, and yet it won’t touch coal from Australia due to a geopolitical squabble,” the report said.

“Prices for Australia’s Newcastle coal, considered an Asian benchmark, have surged close to a record.”

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