China mined a record amount of coal in 2021. It could produce even more this year

While increased production has helped bring the power crisis under control, coal prices are rising again this year amid expectations that China will still need more fossil fuels to fuel its economic recovery.
Coal production hit a record 4.07 billion metric tons last year, up 4.7% from 2020, according to data released by China’s National Bureau of Statistics earlier this week. Coal imports also increased last year, reaching their highest level since 2013.

China is already the world’s largest coal producer and consumer, but its record production is remarkable given that just a year ago the country was touting aggressive measures to seriously reduce its emissions.

In September 2020, Chinese President Xi Jinping declared that the country would become carbon neutral by 2060, and his government took drastic measures in the first half of 2021 to make this a reality, including closing hundreds of mines. of coal.
Those ambitions – which analysts already suspected would be difficult to achieve, especially as China’s economy recovers – were challenged by a power crisis last year, as coal supplies dropped sharply. The country has recorded widespread power shortages, including domestic power outages. Factories have also been forced to cut production, which has disrupted supply chains.
To ease the crisis, China ordered mines to increase coal production last fall. By December, production had jumped more than 7% from a year earlier to an all-time monthly high of 385 million metric tons, according to recent statistics. It was also the third consecutive month of increases.

Even Xi softened his tone on carbon emissions a bit, suggesting that China’s leaders understand the challenges of their targets.

“Carbon peaking and carbon neutrality cannot be achieved overnight,” Xi said Monday in an online speech to the World Economic Forum. “Through solid and steady steps, China will pursue a gradual and orderly reduction in traditional energy while finding reliable substitution in new energy.”

Meanwhile, prices in China for thermal coal – which is mainly used to generate electricity and provide heating – have soared in recent days. Thermal coal futures jumped nearly 7% on Wednesday to around 775 yuan ($122) per metric ton, according to the Zhengzhou Commodity Exchange. The contract is up 13% so far this year.

China expects its electricity consumption “to continue its rapid growth in 2022”, Li Yunqing, an official with the National Development and Reform Commission, said at a press conference Tuesday in Beijing. . Consumption in 2021 was already strong, increasing by 10.3% compared to 2020, according to government statistics.

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Analysts at Guotai Junan Securities, a major Chinese investment bank, attributed January’s coal price rebound in part to a recent ban on coal exports from Indonesia. China had been importing more coal from the Southeast Asian nation to meet its domestic demand, particularly after it reportedly restricted imports from Australia at the end of 2020.

Guotai Junan analysts expect coal demand to remain strong this year as China needs to stabilize its economic growth, and coal-fired power is key to that plan, according to a research report released Tuesday.

Chinese policymakers have made it clear that ensuring stability is a top priority in 2022 and have pledged to take proactive steps to support growth. Earlier this week, China announced that its GDP grew by 8.1% in 2021, beating the government’s own targets. But growth slowed to half that pace last quarter and may not accelerate much this year, some economists say.
Leaders of China’s ruling Communist Party said last month they would prioritize infrastructure investment in 2022 to support economic growth because such projects can create more jobs. But such work is highly dependent on fossil fuels.
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