China's coal collapse

Coal has been a booming export business for China in recent years, but inadequate supplies may threaten not only foreign trade but also energy supplies at home. While the increasing global demand for the fuel has allowed both China and India to successfully tap a huge international market, the rising cost of transporting the product has contributed to the search for local coal. In the U.S., the largest energy-consuming nation in the world, followed closely by China, domestic coal firms have seen soaring profits in the first half of 2008.

Meanwhile, the Chinese have reduced exports by over eight percent, idled more than 60 coal plants and announced they will lower import tariffs on the commodity, all because of shortages. It’s more than foreign competition and transport prices the country has to worry about — energy supplies within the PRC are dwindling to dangerous lows. We in Shanghai got a taste of what such scarcity might mean when blackouts struck the scorched city earlier this month.

State Grid Corp. of China, the nation’s biggest electricity company, recently revealed that almost half its power station have coal stockpiles below the “caution line.” In the past three weeks alone supplies have plummeted, in part due to closure of small mines around Beijing to decrease Olympic pollution. The situation may get worse as winter sets in and hydropower output decreases as demand continues unabated, or even increases.

After last week’s mining accident in Guangxi, the words “coal collapse” took on tragic tone. If supplies continue to disappear, the phrase’s connotations may be much more dire.

Photo from LHOON