The heavy rains rolling though southwestern and central China are filling up the rivers and reservoirs that feed the country’s mighty dams, posing another threat to the coal market that competes with hydropower in electricity generation.

The storms are expected to last through at least early next week, the latest downpour of a rainy season that peaks between June and August. The major hydropower regions of Yunnan and parts of Sichuan and Guizhou are set for as much as 250 millimeters (10 inches) of precipitation during the period, some 20% to 70% more than average, according to the China Meteorological Administration.

That’s good news for dam operators as large tracts of these provinces, with the exception of Yunnan, have largely seen below-average rainfall so far in June, the weather agency said. But it’s less welcome for the coal industry, which is grappling with chronically weak prices.

The rains are arriving at a critical time. Nationwide hydropower generation dropped 14% in May compared with the previous year. That’s the month when output usually turns higher after the dry season, giving the first clear indication of how much hydro can be relied on to meet spiking power demand during the sweltering heat of the summer.

A big rebound from dams like Three Gorges on the Yangtze river, the world’s largest power plant, could further suppress coal-power generation, which fell 3.1% over the first five months of the year.

Hydro and coal are the two main baseload power sources that the country depends on to deliver electricity, whatever the conditions. But the coal market is on its knees — a function of both a glut of the fuel and China’s slowing economy — with benchmark prices crashing 30% in the last 12 months to their lowest in over four years. Mining profits have consequently collapsed.

Time for hydro companies to shine, except the sector has become increasingly unpredictable in recent years as a warming climate delivers more extreme swings in weather.

In 2022, hydro generation began the year at record levels, until an historic drought in the summer dried up reservoirs and forced governments in Sichuan and Yunnan to curtail electricity to factories for weeks.

That might be weighing on the minds of dam operators now. Last month’s hydropower contribution may have disappointed, but it wasn’t because of a lack of rainfall. Indeed, parts of the south were inundated. Perhaps too much rain fell downstream of the dams, or it could have been because officials held back water in case of another late-summer drought.

So it’s eyes on the skies for both miners and dam companies. Less hydro means more coal is needed to power up the country’s air conditioners, delivering a shot in the arm for the beleagured mining industry. But a torrent of water from Three Gorges and its ilk could sink prices of the fossil fuel even further.

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