China's power outages reflect coal's resurgence in 2021

Since early September, China has implemented wide-scale power cuts focused on energy-intensive industries, causing major disruptions in domestic and global supply chains. The stated aim of these actions by provincial governments is to help meet energy demand and intensity targets set by the central government for the third quarter. But, the more direct cause has been soaring thermal coal prices which raced up to RMB1500/tonne (US$230/tonne) since August, 156% higher than a year earlier. In the last two weeks of September, outages hit up to 20% of demand in key provinces like coastal Jiangsu. On 1 October, the central government has come out against such intense cuts and supported growth in the coal supply. We expect moderation in outages in October, but managed demand shedding will continue impacting up to 5% of power demand through year-end and perhaps longer if thermal coal prices remain high.