China floods add to global energy price woes as coal mines forced to shut

Shanxi province, accounting for a third of China’s coal supplies, has been forced to temporarily shut 60 of its 682 coal mines

Heavy rain and flooding in northern China has led to a record surge in coal prices after several of the country’s coal mines have been forced to shut.

Thermal coal prices on the Zhengzhou Commodity Exchange rose by a further 10 per cent for the second day on Tuesday. Prices had touched a record high already on Monday after rising 12 per cent.

International thermal coal prices have already gone over 100 per cent since May this year as businesses continue to emerge from the pandemic and step up their activities, triggering a dramatic shortage.

In attempts to meet the gap between rising post-pandemic energy demands and supply of available coal stocks, China had reportedly ordered its coal mines to boost output.

Matters, however, have become worse after torrential rain and flooding hit the northern part of the country, impacting its coal mining regions.

Home collapses and landslides have been reported in more than 70 districts and towns in north China. Heavy rain has killed at least 15 people in Shanxi province, a mining hub that accounts for a third of China’s total coal supplies, and affected 1.76 million people, local authorities said on Tuesday.

At least 60 of the total 682 coal mines in the province were subsequently forced to shut temporarily, according to a statement published on Saturday by the provincial government’s Emergency Management Bureau.

Some of the mines, however, are now cautiously resuming operations.

The further increase in coal prices, after China began grappling with its energy crisis, has hampered the country’s efforts to expand fuel supply. In recent weeks, the world’s largest coal producer has been forced to limit electricity supplies to millions of homes and businesses.

Frequent power cuts have affected industrial production as well, as fears of a complete blackout looming large.

Neighbouring India hasn’t been spared the coal shortage either, as 63 of the country’s 135 coal-fired power plants reported two days or less of coal stock last week.

India’s shortage of coal has also partly been triggered because of transportation delays caused by extreme weather conditions.

Apart from coal prices, Brent crude also hit its highest level since October 2018 at $84.60 on Tuesday.