The Economist had a chart of the day earlier this week highlighting the new ultra-high-voltage projects in China:
The largest connector under construction, the Changji-Guquan link, will carry 12,000MW (half the average power use of Spain) over 3,400km, from Xinjiang, in the far north-west, to Anhui province in the east.
This is a good illustration of the changes that are going on in China that will have a big impact on anyone who exports coal to China.
My pictorial version of the issue is shown below:
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Over in our corner of the world:
Now, transporting coal by rail is expensive. Transporting by ship is cheap.
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But, China’s plan is to reverse the flow. To produce power in the North West where the coal is and then pipe the electricity to the east. The benefits are:
More inland employment
Less smog in the east (where there are lots of people) and more in the west (where there are fewer people)
Uses Chinese coal at source, so don’t have to pay for transport (basically its switching coal transport with electricity transport)
Too expensive for Australian or Indonesian coal to be imported to north-west China as they would have to pay for both a long maritime journey, then a long train journey
Closer to cheap Russian gas
More consistent wind energy in the north-west
None of this will happen overnight.
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But it makes a lot of sense. And it is not helpful for Australian coal.
Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):
