FEW CRISES highlight China’s weight in commodity markets as clearly as the global energy crunch. Though analysts attribute the shortages to many different causes, all mention China. Its post-covid economic recovery coupled with a hot summer produced a surge in demand for power. Supplies of its two main sources of electricity, coal and hydropower, were curbed by environmental crackdowns and droughts, respectively.
At first, China tried to supplement power generation with liquefied natural gas (LNG). Its imports of LNG so far this year are 14% higher than in the same period last year. That has caused prices to surge and had ripple effects around the world. As LNG cargoes have been rerouted east, for instance, Europe has found itself short of gas. Rising gas prices have only underscored the importance of coal in China, which already consumes 55% of the world’s supply of the stuff. In October China imported nearly twice as much coal as it had in the same month in 2020, causing prices to boom. Even oil has risen on expectations that China will burn that too, if necessary, to keep its electricity plants running. As usual in commodity markets, other factors are also at play. But China still shakes the world.