By Damdul,

China for energy consumption is making ashift from coal to renewables and nuclear power. Though China has a largecapacity for coal resources, occasionally China imports quite a number, subjectto transportation costs.

Europe for the past few months has facedpower cost escalation, there are many other factors that have led to thissituation but China shift in energy consumption has affected it the most. Thisshift of China has major consequences for prices outside its borders.

In Europe, the gas prices are goingvertical and coal prices are priced top of the range. There are numerousspeculation and complaints coming online blaming some probable causes moreoveradding gas storage reduction. The question on renewables, they are variablesabsence of them would unquestionably make Europe want more gas.

According to Alex Turn bill who was workingon China’s coal markets and logistics with ANU, the recent market advancementand the domestic factors led to major changes in imports. This had affected thewhole world.

Past five years China’s energy market andglobal market, particularly LNG and pipeline gas have become progressivelyconsolidated. This was like a bonus for the gas producer as a new crucial customerwith massive growth has emerged. Meanwhile, Europe demand has in general beenreducing towards a flat over the period.

This can be anticipated that whateverhappens in China’s market does not stay in China’s market but id proliferatedthroughout the world. For instance, if China faces scarcity or superfluity ofgas, coal or electricity they proliferate like wildfire across the world asChina is a crucial and unpredictable importer of these resources.

The first impact of coal squeeze was onAustralia when China shipping to Southern was coming from Northern Chinaleaving no room for import of thermal coal. In 2021 China’s coal inventoriesstarted to draw from Northern port to Southern port though it seemedimmaterial. The demand for electricity utilization was 14% in April- June andsteel output was 21%, coal stock started to depreciate as can be seen below ^[1]

Henceforth, the demand was very high andthe supply was very low which had a major impact on the domestic productionsand imports. China’s coal production is massively centralised in a fewprovinces only.

InnerMongolia and Shaanxi production were very low particularly in the escalatingdemand for electricity driven by industrial out-turn of metal. Imports werebadly afflicted from two crucial suppliers first was Australia for politicalreasons and Mongolia apparently for covid reasons.

InnerMongolia was facing some internal anticorruption crackdown problems.Particularly, during the period when the government was talking about greeningthe economy and commodity imports are usually sources of illegal and unfairgains.

InMarch we could find Xi making categorical references to anti-corruptionmeasures encompassing the coal sector in Inner Mongolia. The decline of importsand production over this period has led to a scarcity of relatively 30 MTattributable to the forfeited production and another 12MT from Mongolianimports.

Chinahas been the top exporter, has been badly hit and the crucial energy companies Sinopec

Corp and China National Offshore OilCompany (CNOOC) are in leading talks about long-term contracts with U.S.exporters of liquefied natural gas (LNG), ^[2]sourcestold Reuters.

We can conclude that energy markets arestrongly coupled via fossil fuel. The demand for gas is falling which has animpact on Europe. Nuclear and hydro are required with more storage of gas.China provincial corruption has an impact on production. China is charging apremium for supplying gas to Northern Europe this winter.

One thing is quite clear that China is takingadvantage of the situation. The transition of the source from coal is provingto be expensive for the world; it is not just the emission of fossil fuel thatthe world has to pay in addition also to the volatility of the Chinese market.

China has taken measures to control theprice rise and the domestic demand, for that they have cut down the supply topower-hungry industries. This problem is faced because China is struggling toachieve carbon peaks by 2030. Though, China is striving to reduce its dependencyon coal power. The fact cannot be neglected that coal produces electricity thatmeets the massive demand of China.