India and China caught up in “coal fever”
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The energy crisis in India and China is quickly spilling over from a local problem to a regional problem.

With a drastic shortage of shipments, mainly from Indonesia and Australia, the world’s largest consumers of coal – India and China – are becoming locked in a fierce competition to buy up what they can.

    And the situation is made worse by outside, climatic factors. In India, collieries have been flooded by heavy rains. And in China, cold weather has set in, pushing up demand for coal far more than usual.

     As a result, world coal prices have soared by 40 %. India’s imports have fallen by 12 % to a two-year low.

     Coal India, the world’s largest coal mining company, has halted supplies to some industrial customers and redirected them to coal-fired power stations, Bloomberg reported.

    “This is only a temporary prioritisation,” Coal India said in a text message. “Once the situation stabilises, expected within a short time, and stocks at coal-fired plants attain a comfort level, other sectors will be brought back to their regular supply norm.”

    Raj Kumar Singh, India’s Minister of Power and New and Renewable Energy, had earlier said he could not rule out coal shortages continuing over the next six months.

    India had been prepared to switch over to using more domestic coal, but torrential rains in the coal-producing states of Jharkhand, Odisha and West Bengal prompted colliery shutdowns and a decline in production.

    Reuters quoted sources as saying that India was considering establishing strategic reserves of imported coal and gas to prevent future fluctuations in supply and price. Reserves would have to be sufficient for a month’s supply.

    In China, prices remain on the rise owing to shortages, a situation compounded by the onset of cold weather. Local coal futures contracts have hit record levels. According to data from Bloomberg, coal futures closed at record highs at each of the last six trading sessions and have risen by more than a third since the end of September. According to Reuters calculations, coal futures have climbed by more than 260 % since the beginning of the year.

    Against a background of power cuts, China has even started importing coal from Australia without going through standard customs procedures after authorities slapped an official bar on imports. 

    And energy shortages in China are threatening growth not only in the world’s second economy but also world-wide supply chains.

    Phillips has already warned that its sales in the third quarter have been adversely affected by problems with world-wide supply chain, including electronic components. Rolling blackouts are shutting down plants producing parts ordered by Tesla and Apple.

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