China Importing More Coal

“China, for the first time, is an importer of coal,” writes Chris Mayer. “And it looks like it might be an importer for some time yet, providing a boost for coal prices. There has been drought in southern China and the Mekong Delta for months now. Now there is also drought in the northern part of the country. Since there is quite a bit of hydropower in these places, it looks like output could drop 70-90%. That would mean electricity shortages of 10-15% nationally.

“Unless China gets some big-time rain soon, that will mean it will have to rely more on coal to make up the difference. In fact, there is a possibility that China’s reservoirs go completely dry, in which case its hydropower plants will have to shut down…

“The longer this drought goes on, the more the Chinese will have to buy coal to offset the decline from hydropower. We could see quite a spike in coal prices over the next few months as Chinese buyers wade into the market.”