Power shortages plagued many of China’s provinces earlier this year and are likely to return this winter as coal prices soar and some power plants find it difficult to store coal, an industry expert said.

“The problem might become serious this winter as many power plants may have to suspend production due to a coal shortage, which will lead to a massive electricity crunch,” said Lin Boqiang, an energy professor with Xiamen University.

According to Lin, many power plants’ coal inventories have dropped sharply, which he attributes to financial difficulties at these companies, a dwindling coal supply and a reluctance to boost production because of the gap between government-set electricity prices and market-oriented coal prices.

The Bohai Rim Steam Coal Price Index, China’s government-run coal price gauge, has expanded gains for the second consecutive week after rebounding from a nine-week fall.

Soaring coal prices are sucking up the profits of many power generating companies, even in coal-rich provinces such as Shanxi.
China’s Economic Information Daily on Sept 20 quoted a power plant official in Shanxi’s city of Linfen who said coal purchasing accounts for more than 80 percent of the company’s operating costs and high coal prices are squeezing the company’s profit margins.

Power generating companies are also cutting their coal inventories to combat the price hikes. Coal-fired power plants in Hunan, Shanxi and Guizhou provinces have enough coal stored for 10 days’ operation, compared with enough coal to last more than 30 days last year, according to the newspaper.

Meanwhile, in Central China’s Hunan province, the coal inventories of all the major power generating factories in the province stood at around 1.4 million tons by Sept 10, compared to 3 million tons at the same time last year. – Xinhua

Source:cnbusinessnews