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China Coal Imports May Rise as Drought Saps Hydropower, UBS Says

China, which relies on coal to produce more than 70 percent of its electricity, may increase imports of the fuel by 1 million metric tons a week as drought conditions cut hydropower output, according to UBS AG.

Hydropower capacity has fallen as much as 20 percent, UBS analysts led by Sydney-based Tom Price said in a note dated yesterday, citing industry reports. Electricity generated by hydro dams accounts for about 15 percent of China’s overall supply, according to UBS.

Rivers in eastern Jiangxi province are at their lowest levels on record because of reduced rainfall, the official Xinhua News Agency said last month, citing an unidentified spokesman with the provincial drought-relief headquarters. Additional imports of seaborne coal are needed for as long as the drought persists or until supplies stabilize in the second half, according to the report.

China’s coal supplies are “very tight” because of higher energy consumption growth before the peak summer period, UBS said. While production is expanding at a “robust” rate, the increase may not be enough to fill the gap, according to UBS.

Imports of coal, including power-station and steel-making varieties, averaged 10.8 million tons a month in the first quarter, Bloomberg calculations based on data released by Chinese customs show. Imports rose 31 percent last year to a record 165 million tons.

The world’s biggest energy user may face power shortages of 30 gigawatts during the summer as supply lags behind demand, the China Electricity Council said on April 29.

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