Energy crunch-the shock in the pipeline for China’s economy: Widening power shortages in China have halted production at numerous factories including many supplying Apple and Tesla.
Rationing has been implemented during peak hours in many parts of northeastern China since last week, and residents of cities including Changchun said cuts were occurring sooner and lasting for longer, state media reported.
Almost half of China’s regions missed energy consumption targets set by Beijing and are now under pressure to curb power use. Among the most affected are Jiangsu, Zhejiang and Guangdong — a trio of industrial powerhouses that account for nearly a third of China’s economy.
On Monday (Sep 27), State Grid Corp pledged to ensure basic power supply and avoid electricity cuts.
China’s power crunch, caused by tight coal supplies and toughening emissions standards, has hurt production in industries across several regions and is dragging on the country’s economic growth outlook, analysts said.
The impact on homes and non-industrial users comes as night-time temperatures slip to near-freezing in China’s northernmost cities. The National Energy Administration (NEA) has told coal and natural gas firms to ensure sufficient energy supplies to keep homes warm during winter.
Liaoning province said power generation had declined significantly since July, and the supply gap widened to a “severe level” last week. It expanded power cuts from industrial firms to residential areas last week.
The city of Huludao told residents not to use high energy-consuming electronics like water heaters and microwave ovens during peak periods, and a resident of Harbin city in Heilongjiang province told Reuters that many shopping malls were closing earlier than usual at 4pm. The power squeeze is unnerving Chinese stock markets at a time when the world’s second-largest economy is already showing signs of slowing.
PRODUCTION FALLOUT
Tight coal supplies and toughening emission standards have driven the power shortages across China.
China has vowed to cut energy intensity by about 3 per cent in 2021 to meet its climate goals. Provincial authorities have also stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year.
The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.
GDP CUTS
The fallout of the power shortage has prompted some analysts to downgrade their 2021 growth outlook.
“The power-supply shock in the world’s second-biggest economy and biggest manufacturer will ripple through and impact global markets,” analysts in a Sep 24 note, warning that global supplies of textiles, toys and machine parts could be affected.
Last week, major coal producers in China met to try and resolve shortages and curb price increases.
PRICE
China’s thermal coal futures have surged in the past month, repeatedly setting records, as concerns over mine safety and pollution constrain domestic output while it continues to ban shipments from top supplier Australia. Meanwhile, natural gas prices from Europe to Asia have surged to seasonal highs as countries try outbid each other for fast-depleting supplies.
One reason behind the curbs on electricity usage is that China wants to reduce emissions in time for the winter Olympics slated for February in Beijing [File: Qilai Shen/Bloomberg] In previous winter power surges in China, many have turned to diesel generators to plug the shortages of power from the electricity grid. This year, the danger is government policies have further limited the energy industry’s potential to increase production to meet the demand increase, said Zeng Hao, chief expert at consultancy Shanxi Jinzheng Energy.
Yunnan Aluminum Co., a $9 billion producer of the metal used in everything from cars to soda cans, has curtailed output due to pressure from Beijing. The shock is also being felt in China’s giant food sector. Soybean crushers, which process the crop into edible oils and animal feed, were ordered to shut this week in the city of Tianjin.
According to Nikkei, suppliers to Apple Inc. and Tesla Inc. halted production at some of their sites in China on Sunday. Foxconn’s facilities in Longhua, Guanlan, Taiyuan and Zhengzhou — the world’s largest iPhone manufacturing complex — remained unaffected by the power-supply restrictions, the report said
A number of smaller companies are also starting to inform the stock exchange they’ve been ordered to curb or halt activity. While they may be overlooked by major foreign investors that don’t cover these firms, the end result could be a shortage of everything from textiles to electronics components that could snarl supply chains and eat into the profits of a host of multinational companies.
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https://www.chinadaily.com.cn/a/202109/27/WS61517c3ea310cdd39bc6bdaf.html
