Right up until Russia invaded Ukraine and exacerbated the global energy crisis, most developed countries were firing down their coal power plants in favor of cleaner sources of energy. Coal is the largest source of carbon emissions on the planet, and supplementing it with cleaner alternatives would go a long way toward combating runaway climate change.
However, the Russia-Ukraine war forced plenty of European countries to turn back to coal as Russia cut its oil and natural gas exports to the rest of Europe.
But while Western countries steadily reduced their imports of Russian coal, even though it was heavily discounted due to Western sanctions, China did not turn away from Russian imports. As the European ban on Russian coal approached, China became the largest importer of Russian coal in the world alongside India. Last month, coal imports to China rose by almost a quarter compared to June as the country’s power providers purchased more coal in anticipation of increased power demand in the summer.
In fact, the Chinese government has asked coal-burning power generators in the country to increase their coal stocks, vowing not to ration power this summer like it did last year. Last September, China was hit by a surge of power shortages that forced the country to ration electricity in several provinces and regions.
Manufacturers that work in energy-intensive sectors such as aluminum smelting and steel making were hit especially hard as authorities called on them to limit their electricity usage during peak consumption times. As the summer approaches, there have been fears that the country will experience widespread blackouts like it did last year, especially as prices in the energy sector soar.
In late June, the premier of China said increased coal production would be necessary to prevent mass blackouts over the summer. According to July sales data tracked by Refinitiv, China raised its coal imports by 24% in July to achieve a record 23.5 million tons of coal. Data from the General Administration of Customs showed that China imported roughly 18.9 million tons of coal from Russia.
The country has imported a total of about 138.5 million tons of coal in 2022 so far, a drop of 18% from the coal imported in the same period last year.
The Shanghai Shipping Exchange noted that large coastal regions consumed approximately 2.2 million tons of coal daily in late July, partly due to a great temperature spike that increased the use of air conditioning in the country.
Coal imports from Russia have increased significantly in the past couple of months, with Refinitiv reporting that China imported almost 7.4 million tons of Russian coal in July.
This summer is likely to be a profitable one for players in the coal industry such as Warrior Met Coal Inc. (NYSE: HCC) since demand for this fuel source is rising with no end in sight.
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