China is significantly ramping up its coal and natural gas production, imports, and consumption to meet the escalating electricity demand, particularly in anticipation of a record-high peak demand during the winter season.

Authorities in China have issued directives to maximize coal and natural gas imports and production to prevent shortages and surging prices, aiming to avert a recurrence of last year's supply constraints.

The National Energy Administration (NEA) spokesperson disclosed that China foresees a potential 12.1% surge in peak power demand, equivalent to 140 gigawatts (GW), during the upcoming winter. Despite overall confidence in power supply stability, localized shortages may arise in regions like Yunnan province and Inner Mongolia.

The heightened demand is attributed to increased electricity consumption in the latter half of the year, compounded by a hotter-than-usual summer. In response, China aims to ensure power supply stability by maintaining high coal volumes throughout the winter.

Moreover, Chinese natural gas demand is anticipated to witness an 8% surge this year compared to 2022, with both LNG and pipeline gas imports expected to rise by approximately 11%. Lower LNG prices this year have contributed to higher Chinese LNG imports, potentially impacting the global market, particularly Europe, which heavily relies on LNG amid challenges with Russian pipeline gas supply.

Amidst rising demand in Asia and Europe, LNG spot prices in Asia have fluctuated or remained steady due to high inventories and weaker demand. To prepare for the peak winter season, China instructed major gas suppliers to fill storage sites, aiming to better manage supply amidst potential international market disruptions.

Additionally, the government has urged coal miners to escalate production to meet surging electricity demand as China continues to rely on coal and coal-fired power generation, despite its significant investments in renewable energy sources like solar and wind. The nation approved more than 50 GW of new coal power during the first half of 2023, indicating a strategic emphasis on coal-fired electricity capacity.