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China Price Index: China’s Persistent Energy Crisis to Disrupt Agrochemical Production Into 2022

On October 8, Premier Li Keqiang presided over an executive meeting of The State Council, making further plans to ensure the supply of electricity and coal in 2021 winter and 2022 spring to ensure the basic livelihood of the people and the smooth operation of the economy.
Winter arrives soon, and China normally starts the central heating system in the middle of November. People’s livelihoods will be the top priority, so the government will first direct the energy supply to the northeast region of China for heating during the winter. Moreover, the Chinese government will also release the capacity of local coal to the market to support the electricity industry. With that coal, the electricity companies also need to keep a reasonable profit margin for easing a shortage of the energy supply. Delayed payment of taxes and making the transportation of coal a priority will support the coal-fired power companies. The final price for electricity is subject to as much as a 20% fluctuation. For a high-energy consumption industry, electricity prices can be formed by market transactions regardless of the 20% fluctuation policy.
According to a report, China’s electricity consumption from January to August 2021 increased by 13.8% year-on-year, while profits of power and heat enterprises fell by 15.3% according to the public data from National Bureau of Statistics. Based on a report from Reuters, of 10 listed coal-fired power companies, four reported losses and five others saw first-half profits plunge. The dramatic drop in profitability comes amid a surge in domestic thermal coal prices. The price of coal has more than doubled from the 467-Yuan-per-tonne low in 2020.
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