China's coal imports surge 76% as floods deepen energy crisis

In September, China's power plants bought coal at a pace not seen in years—32.88 million tonnes of imports, a 76 percent jump from the same month a year before. It was the fifth-largest monthly haul on record. The buying spree reflected something closer to desperation: the world's second-largest economy was running short of electricity, and the shortage was beginning to ripple through factories, supply chains, and the lives of people trying to do business there.

The crisis had multiple causes, layered and reinforcing. China consumes more coal than any other nation on earth, and domestic production had not kept pace with demand. Then, in September, heavy rains flooded coal mines across Shanxi province, one of the country's top producing regions. Sixty mines went underwater. Four of them—with a combined annual capacity of 4.8 million tonnes—remained shuttered as of mid-October. Local governments in Shanxi and Inner Mongolia, desperate to reverse the shortage, ordered roughly 200 mines to increase output, but the weather was working against them.

The price signals were stark. Thermal coal futures on the Zhengzhou exchange hit 1,640 yuan per tonne on October 13, a record. The contract had nearly tripled in value over the course of the year. These were not abstract market movements—they meant that power plants faced crushing fuel costs, and the government faced a choice about who would bear them.

On October 12, Beijing made that choice public. For the first time in decades, the government allowed coal-fired power plants to pass high generation costs directly to commercial customers through market-based electricity prices, rather than locking in fixed rates. It was a significant policy shift, one that signaled how serious the shortage had become. The move was designed to encourage more coal-fired generation and to distribute the pain more broadly across the economy. But it also meant that businesses would pay more for power, and that inflation pressures would likely spread beyond China's borders.

The electricity shortages were already forcing cuts. Steel mills in 28 cities received orders to reduce winter output by at least 30 percent. Power rationing was hitting energy-intensive sectors—metals, chemicals, and others—and the disruptions were beginning to leak into supply chains. The European Chamber of Commerce reported that some European firms operating in China faced delays in orders. Some complained about power cuts announced late at night, leaving little time to adjust operations. One senior economist at Capital Economics warned that while exports had held up so far, the risk remained that power rationing could eventually derail them, especially if shortages in upstream industries like steel and chemicals cascaded through to downstream exporters.

China was not alone in facing an energy crunch. Russia, Mongolia, and Indonesia all faced constraints on coal exports—Russia and Mongolia limited by rail capacity, Indonesia by wet weather. Kazakhstan and other niche suppliers found themselves suddenly in demand. But China's scale meant its crisis had global weight. Electricity consumption in the first nine months of the year was up 12.9 percent from the prior year, driven by industrial demand that showed no sign of slowing.

Analysts and traders forecast that the shortage would persist through winter and into early 2022. They expected industrial power consumption to drop 12 percent in the fourth quarter as coal supplies fell short and local governments prioritized residential users over factories. The government had released some Australian coal from bonded storage—coal it had effectively banned for nearly a year—but the volume was limited. The energy crisis, in other words, was not something that would resolve quickly. It would shape production decisions, pricing, and supply chains well into the new year.