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Since the beginning of winter this year, the spot and futures prices of thermal coal have continued to rise. According to CCTV Finance, the thermal coal in Yulin, Shaanxi has risen by 160 yuan per ton since May, an increase of 35%, and 110 yuan per ton higher than the same period last year. The rise in coal prices is mainly due to insufficient supply . The reasons are mainly reflected in the following two aspects: 1. National energy supply-side reform to reduce the proportion of coal use The 13th Five-Year Plan is a critical period for my country's energy supply-side reform. According to the latest "13th Five-Year Plan for Energy Development", the proportion of coal in my country's energy supply will be reduced in stages, requiring that the total coal consumption be controlled within 5 billion tons of standard coal by 2020, and the proportion of energy consumption will be reduced to below 58%. Therefore, in this context, domestic coal companies have directly driven up coal prices by reducing supply from the production side. 2. Coal imports are blocked and supply is reduced Although my country is the largest coal producer, it is not completely self-sufficient in coal consumption and still needs to import large quantities of coal from Australia, Indonesia, Russia, Mongolia and other countries. However, this year, trade frictions between Australia and China escalated amid the COVID-19 pandemic, and China reduced its imports of Australian coal. According to data released by the General Administration of Customs, China's imports of Australian coal dropped sharply from a peak of 9.44 million tons in May to 5.17 million tons in October, and by November, the figure had dropped to 1.79 million tons. On the other hand, although China has once again increased the total amount of coal import orders from Indonesia, Mongolia and Russia, and signed a $1.46 billion thermal coal order with Indonesia in November, the current situation of coal supply and demand is unlikely to be alleviated in the short term. Power shortage in southern provinces, cryptocurrency mining farms are subject to power cuts The most direct impact of coal supply shortage and price increase is power shortage, which will also increase the cost of power generation. However, the combination of rapid growth in industrial production and cold snap this year has led to an unexpected increase in power demand, and the contradiction between power supply and demand has also directly affected the operation of cryptocurrency mines in southwestern provinces. At the end of November, the Sichuan Provincial Department of Economics and Information Technology issued the "Notice on Doing a Good Job in Electricity Production and Supply during the Dry Season of This Winter and Next Spring". The notice requires that in addition to ensuring the supply of thermal power during the dry season, orderly power management should be strengthened. All cities and prefectures should further refine orderly power consumption plans according to the constraints of local power grids, and implement control indicators to specific enterprises and lines. When power supply is tight, priority should be given to ensuring the power needs of key users involving public interests and national security, such as residents' lives, party, government and military agencies, hospitals, schools, railways, and transportation hubs. Therefore, as many electricity users compete for electricity resources, mining farms, which are large electricity users, are often subject to power restrictions and power outages. We specifically asked several miners in the industry whether this round of power restrictions in Sichuan has affected their mining operations. This is their answer . As foreign coal cannot be imported and electricity supply is limited, we are considering relocating the mining machines to Xinjiang, where thermal power is stable. Our mine was not affected by power restrictions, but we had to submit an application for approval to state the amount of electricity we were using and the amount of electricity we were going to use. We are in Aba Prefecture, Sichuan. We experienced power outages for one day at the beginning and middle of this month respectively. We are still a little worried about power outages. In Yunnan, there are documents every year to regulate and rationally allocate electricity resources during the dry season. Mine operations during the dry season will also be adjusted based on the remaining electricity after the power station is completed and integrated into the state grid. It seems that under the background of this round of power restriction, although the operation of each mine has been affected to varying degrees, and some customers have indeed moved their mining machines to Xinjiang mines due to the trouble of power outages and power restrictions, it seems that the power supply to the mines has not been completely restricted as speculated by the outside world. Why are cryptocurrency mining farms always the victims of power cuts during droughts? A considerable number of mining farms in Sichuan have been connected to power stations for direct power supply for operation. The so-called direct power supply refers to the electricity generated by power stations, which is directly transmitted to the demand side without passing through the national grid. Hydropower stations usually sign access agreements with the State Grid. Even during the dry season, the power stations must give priority to completing the State Grid's access plan. Naturally, it is difficult to guarantee the direct power supply, and the stability of the mine's power supply is out of the question. On the other hand, although the mines that receive electricity from the State Grid can guarantee the stability of power supply to a greater extent, in the face of widespread power shortages such as during the dry season, power resources will also give priority to ensuring basic power demand related to social livelihood. For miners and mine operations, power resources are the lifeline. For mines located in the south, power shortages during the dry season seem to be a cycle that can never be escaped. Therefore, when miners choose to host a mine, it is best to make a decision based on a comprehensive consideration of the price and stability of direct power supply and state-grid power.
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