Read on Twitter
Interesting thread. Market liberalisation in the power market has been talked for more than decade plus and like most SOE reform has been limited. https://twitter.com/pretentiouswhat/status/1343766911419469824
The power generation companies are largely SOEs with about half of them central SOEs. I’m skeptical that it’s concerns about eating losses that limiting inventory levels.
Losses end up resulting in higher leverage rather than them going out of business.
Losses end up resulting in higher leverage rather than them going out of business.
I’d be also skeptical of the need to meet environmental targets. It’s December in the dead of winter. These cuts were in the middle of December. It sounds like the the government explaining away power restrictions.
China has been adding about 50GW of thermal capacity per annum. Some of the expansions may be due to regional imbalances and needs.
BUT China is adding thermal capacity. One factor is building thermal power plants may see more overcapacity but it generates GDP if not power.
BUT China is adding thermal capacity. One factor is building thermal power plants may see more overcapacity but it generates GDP if not power.
China is now trying import more LNG as well.
“China’s central state planner on Monday called on companies to step up imports of spot liquefied natural gas (LNG) and thermal coal to ensure energy supplies ahead of an expected cold spell.” https://www.scmp.com/economy/china-economy/article/3115561/chinas-energy-supplies-set-further-pressure-cold-snap-looms
“China’s central state planner on Monday called on companies to step up imports of spot liquefied natural gas (LNG) and thermal coal to ensure energy supplies ahead of an expected cold spell.” https://www.scmp.com/economy/china-economy/article/3115561/chinas-energy-supplies-set-further-pressure-cold-snap-looms
Winter is peak demand season for LNG. Meanwhile:
“Cargo ships holding as much as US$500 million worth of Australian coal have been anchored off China’s coast waiting for permission to unload”
“Cargo ships holding as much as US$500 million worth of Australian coal have been anchored off China’s coast waiting for permission to unload”
So yes, a strong growth in power demand coupled with domestic production issues and falling imports (poorly timed Aus import bans) has contributed to a tight coal market with inventory levels relatively low as China enters seasonally high demand.
Lifting import bans would help
Lifting import bans would help
A good thread by @pretentiouswhat breaking down the Caixin article.
The power market in China is messy. There are lot of politics (domestic and international) and inefficiencies.
Despite the narrative, BJ DOES have some agency to reduce power restrictions if it so chooses.
The power market in China is messy. There are lot of politics (domestic and international) and inefficiencies.
Despite the narrative, BJ DOES have some agency to reduce power restrictions if it so chooses.
