Record Rainfall In China Caused Chaos In Coal Markets

Shanxi is responsible for 30 Percent of the country’s energy supply.

25 Oct 2021 by The Water Diplomat

Unprecedented rainfall hit the Northern Chinese province of Shanxi in recent months with an estimated 1.76 million being affected. Landslides have been reported causing at least 17,000 homes to collapse and requiring the relocation of more than 120,000.

Just three months after the neighbouring province of Henan was impacted by extreme floods that killed 300 people, the coal mining province has now been affected and an economic shockwave is feared.

Shanxi is responsible for 30 Percent of the country’s energy supply. Twenty-seven coal mines were closed on 4 of October due to heavy rains and, as a result of the new floods, 60 more coal mines have had to shut down. Local authorities have also ordered the temporary closure of 372 non-coal mines and 14 dangerous chemical plants. There are fears that possible coal shortages in the Winter and will also reduce productivity in steel, chemicals and cement-making by as much as 30 Percent, with a knock-on effect throughout the economy.

Already facing an energy shortage, Chinese authorities have curtailed energy usage at factories and the ports and have ramped up efforts at additional coal production.

The coal futures market in particular, has been highly unstable. Large companies trade coal futures, which sets a steady price for coal in future periods in order to avoid constant fluctuations and more reliable budgeting. However, fears of shortages have caused coal futures to reach an all-time high earlier this month.

Subsequently, the Chinese government has intervened and prices have plummeted while there are undergoing efforts to bring stability to the market.

An estimated 190,000 hectares (470,000 acres) of crops have been damaged by the floods and many more have been affected. Dragged by strong currents, a bus has fallen into a river causing 3 dead and 11 missing. As thousands struggle to get out of harm’s way, the persistent heavy rains and storms have made rescue efforts particularly difficult.

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