The issue of energy shortages is not just localized, affecting various countries across the globe, particularly in the wake of the COVID-19 pandemicAs economies began to recover post-pandemic, the surge in demand for energy resources became apparent, exacerbating an existing energy crisis that many nations faceA notable example is Europe, where recent winters have led to lower gas supplies, and geopolitical factors—specifically Russia's decreased gas exports—have created an additional strain on energy resourcesThese events have significantly driven up the prices of energy throughout the continent, reflecting a trend that has spread worldwide.

Statistics from this year show that energy benchmark prices in Europe have skyrocketed by approximately 600%. Coal prices are now at a 13-year high, with Aussie coal prices rising by an astonishing 250% since last September

Advertisements

In Germany, energy prices are up by 25% year-on-year, while gas prices have surged by 44%. These shocking statistics illustrate the precarious situation that many countries find themselves in as they grapple with rising costs and dwindling resources.

In the UK, as of September 2021, the price of electricity soared to £285 per megawatt-hour, marking an unprecedented increase of over 500% within a yearSuch alarming data indicates that energy shortages are not just statistics; they have real-world consequences on daily life and the economy, with households and businesses alike feeling the pinch of inflated energy bills.

However, Europe is not alone in this crisisIndia is facing its own severe energy shortages, predominantly due to a dramatic rise in demand for electricity coupled with a concerning scarcity of coalWith 135 coal-fired power plants operating in the country, 16 of them have reported that their coal reserves are nearly exhausted

Advertisements

More alarmingly, over half of the remaining plants have less than three days' worth of fuel available, pushing the nation to the brink of an energy catastrophe.

Turning our gaze to the situation in China, the statistics tell a similar storyBetween March 2020 and the current day, coal prices in China surged by more than 190%, with power coal prices increasing by over 78% since mid-AugustAs the world's largest coal-producing nation, one might wonder why an international energy shortage would affect the availability and pricing of coal domesticallyThe reasons are multifaceted and reflect the complexities of global energy dynamics.

First and foremost, a reduction in coal imports has led to an imbalance between supply and demand, resulting in skyrocketing pricesAlthough China is the world's largest producer of coal, its massive population creates an equally vast demand

Advertisements

Since 2008, China has shifted from being a coal exporter to importing significant quantities of coal to meet its domestic needsHowever, due to the energy shortages in Europe, there has been a restriction on coal exports, combined with exorbitant shipping costs during the pandemic, leading to a dramatic 36% decrease in coal imports—from July to November 2020, imports plummeted by 50 million tonnes.

Secondly, efforts to eliminate outdated production capacities have further escalated the issueIn accordance with its commitment to better environmental practices, China has shut down over 5,500 coal mines by the end of 2020, reducing outdated coal production capacity by more than 1 billion tons annually, down to fewer than 4,700 active coal minesYet, the rapid expansion of renewable energy sources such as wind and hydro cannot compensate for this sudden loss in power generation capacity, with coal-fired power still making up over 70% of China's energy mix.

Additionally, the global economy's heavy dependence on Chinese goods means that factories across the country are ramping up production to meet international demand, putting even more pressure on an already strained energy system

• Strengthening Cooperation for Global Energy Transition
• Rising Energy Prices and Dollar Interest Rate Hikes
• Differences in Inflation Between China and the United States
• Cross-Border ETFs Hit a Sudden Brake!
• Global Energy Crisis: Soaring Coal Prices

This situation of heightened production coupled with limited energy supply has created a perfect storm for power shortages.

The situation is further exacerbated by opportunistic investors who have begun stockpiling coal in anticipation of rising prices, creating further demand pressureThis phenomenon not only drives prices even higher but also contributes to the overall supply-demand imbalance.

Due to these interconnected factors, the current energy crisis in China is pressing and urgentWith soaring coal prices and insufficient electricity supply, many power companies are experiencing substantial lossesIn Shaanxi, one power plant reported a loss of 0.12 Yuan per kilowatt-hour they produced in August, culminating in a staggering loss of 127 million Yuan over the entire month; this financial strain could diminish the willingness and ability of power producers to generate electricity.

Consequently, the ripple effect of these power shortages has seen an increase in operational costs for manufacturing businesses, leading to a subsequent rise in prices for building materials

Steel prices have recently surpassed 6,000 Yuan per ton, with specific increases ranging between 80 to 100 Yuan per ton, echoing trends set by other construction materialsThe prices of PVC materials related to windows and doors have also experienced an increase of 2.76%, reaching wild prices beyond 12,000 Yuan per ton, and even essential sealant materials are becoming scarce.

Furthermore, a provisional survey indicates that hundreds of ceramic factories across 20 or more provinces—including Guangdong, Guangxi, Fujian, Jiangsu, Zhejiang, and Shandong—have collectively announced price hikes that coincided with the first week of OctoberThis unprecedented wave of price increases in ceramics is alarming for the industry, particularly as typical price adjustments are far less frequent and usually occur in smaller increments.

Looking ahead, sectors involved in paints, waterproofing products, lighting, and customized home furnishings are bracing themselves for potential price increases as the shortage of raw materials continues.

This interconnectedness of global energy challenges underscores the notion that an energy shortage can have far-reaching implications on various sectors