China PMI: China is mining much more coal again and that's boosting its factories

A government survey of manufacturing activity increased to 50.1 in November from 49.2 in October, according to data released by the National Bureau of Statistics (NBS) on Tuesday. It was the first reading above 50 — indicating expansion rather than contraction — in three months. It was also the first time since March that the index increased over the prior month.

Beijing on Tuesday attributed the improvement to “recent policy measures” that have strengthened energy supply and stabilized soaring costs.

“In November, power shortages eased and prices of some raw materials dropped significantly,” said Zhao Qinghe, senior statistician for NBS, in a statement.

China has grappled with the power crunch for months, as extreme weather, surging demand for energy and strict limits on coal usage delivered a triple blow to the nation’s electricity grid.

The problem came to a head in September, when companies were told to limit their energy consumption in order to reduce demand for power. Supply was cut to some homes, reportedly even trapping people in elevators.

The energy crunch, along with surging raw material costs, resulted in a sharp drop in industrial output for September and October. To combat the problem, authorities have relaxed their efforts to cut carbon emissions and ordered coal mines to ramp up production.

The result was notable. China — which uses more than half the world’s coal supply and is already the largest emitter of carbon — set a new daily record for coal production in mid-November, according to statistics from the National Development and Reform Commission (NDRC).

The agency’s “strong interventions” mitigated the “overall power shortage” and eased cost pressures on some industries, analysts from Citi wrote in a Tuesday research report. The power woes had pushed up the cost of aluminum, steel and other raw materials, rippling through industries like carmaking and construction.