Highlights

  • China facing an acute shortage of coal as demand picks up
  • Coal pricing reaching multi-year high
  • Commodity prices soar as coal demand continues to rise

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Global Coal Shortage: EJ Explains, why you should care

Limitation on coal production is leading to factories shutting which is spiking prices across the globe

From coal in China to gas in UK there is a global energy crisis that is brimming and it is affects everyone as prices across the globe have started to spiral awakening the inflation demon. 

What has happened?

China's bid to go green has led to slowing down of mining production but the demand has not slowed to match the supply fall. More than half of China’s mainland provinces are limiting electricity use.China’s seasonal coal inventories at the lowest level since 2017. 

What is the impact?

Factories across China start to ease production as there is not enough coal to fuel the production line even as producers import coal at higher than ever before prices. This is leading to a global rise in power cost. The price of natural gas and coal, used to power factories and heat homes, has surged to multi-year highs just ahead of the key demand period of winter. 

More than 80 Chinese steel mills have suspended production for maintenance in September as per reports 

The worst case scenario?

Europe could face blackouts peak winters set in and China’s industrial users, including chip makers and aluminum smelters, may shut factories, with repercussions echoing around the globe. Economies that can’t afford the fuel could simply grind to a halt.

How does it affect me?

To put it simply, everything will just get more expensive. From cars to electronics all manufacturers will be forced to raise prices as they face rising bills of production with cost of aluminium to steel soaring due to China's crisis. India's largest automaker Maruti has already raised prices 3 times this year and it may not be the end. Rising inflation in turn would add pressure onto the central bank RBI and loan rates which are currently at the lowest level in over a decade could start to climb again. 

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