China's coal crisis deepens as imports surge 76%, prices hit records amid flooding

China's power plants were in a bind by September. The country's appetite for electricity had grown faster than its coal supply could keep pace, and the gap was widening. In a single month, coal imports jumped 76 percent—to 32.88 million tonnes, the fifth-highest monthly volume on record. Power plants were buying whatever they could find on the global market, but the real problem was at home: domestic coal prices had climbed to levels no one had seen before, and the government was running out of easy answers.

The flooding made everything worse. In Shanxi province, one of China's largest coal-producing regions, incessant rain had swamped 60 mines. Four of them, with a combined capacity to produce 4.8 million tonnes of coal annually, sat idle. Local officials had ordered roughly 200 mines across Shanxi and Inner Mongolia to ramp up output, but water kept getting in the way. Meanwhile, thermal coal futures—the benchmark price traders use—hit 1,640 yuan per tonne on October 13, nearly three times what they had been at the start of the year. The math was brutal: China needed coal, coal was scarce, and prices were climbing toward the sky.

By mid-October, the government had made a dramatic move. For decades, China's power sector had operated under fixed-price rules that let industrial customers lock in stable electricity costs. On October 12, Beijing announced it would scrap that system for commercial users, allowing power plants to charge market-based rates instead. The shift was meant to ease the crunch by letting generators pass their soaring fuel costs to customers. But it also meant that power-hungry industries—steel mills, aluminum smelters, cement plants, chemical producers—would now face bills that could spike without warning. Their profit margins, already thin in a competitive global market, would get thinner.

The rationing was already spreading. More than half of China's regions managed by State Grid had imposed power consumption cuts since September. Factories in Guangdong and Zhejiang, two of the country's major export hubs, were asked to stagger production throughout the week. The European Chamber of Commerce reported that some European firms operating in China were struggling with delayed orders and frustrated by power cuts announced late at night, leaving little time to adjust. Steel mills in 28 cities received orders to cut winter output by at least 30 percent to meet both production targets and climate goals.

Yet the broader economy had not yet buckled. China's total exports accelerated unexpectedly in September, suggesting that global demand was strong enough to absorb the disruptions so far. Power consumption itself had surged—up 6.8 percent in September alone, and up 12.9 percent for the first nine months of the year. The industrial engine that produces electronics, textiles, and equipment for the world was still running, though it was running hot and running on fumes.

The outlook was grim. Coal stocks at power plants could support roughly 15 days of operation, according to the National Energy Administration. Daily output had reached its highest level since February—more than 11.2 million tonnes—but it still was not enough. Analysts were forecasting a 12 percent drop in industrial power consumption in the fourth quarter as supplies continued to fall short and local governments prioritized electricity for homes over factories. The government said it would secure coal and energy supplies for winter while meeting climate targets, a promise that sounded increasingly difficult to keep. The energy crisis was expected to persist into early 2022, and the risk remained that power rationing could eventually ripple through supply chains and damage the export sector that had, so far, managed to dodge the worst of it.