In response to China’s energy crisis, the world’s largest exporter has been forced to cut production to conserve energy. In order to meet the demand for everything from clothing to toys for the year-end holiday shopping season, producers and shippers are experimenting with supply lines that have been disrupted by soaring raw material costs, long delays at ports, and lack of shipping containers. Chinese manufacturers fear that strict energy cuts will decrease output in the nation’s economic powerhouses such as Jiangsu, Zhejiang and Guangdong — which accounts for almost a third of the nation’s GDP — and increase prices. Local governments are ordering the cuts as part of their efforts to reduce energy and emissions intensity, while others are facing actual power outages.
The owner of Vita Leisure Co., based in Zhejiang, China, said that electricity curbs in the province have resulted in further economic damage. Fabric makers in the province are raising prices and putting off taking new overseas orders, he said. Production capacity restrictions are going to cause a mess. Already there were so many uncertainties, and now one more has emerged. ‘Deliveries will be challenging, especially during the holiday season’, said Feng. The local government ordered the manufacturer of synthetic fabric nylon in Zhejiang to stop using electricity on Sept. 25, so Yiwu Huading Nylon Co Ltd. shut down half its capacity. From Oct. 1, the company expects production to resume and will minimize the impact of the closure.
China’s recent port disruptions have rippled across global supply chains, causing power problems. The world’s busiest port, Ningbo, was shut down for weeks last month due to an outbreak of Covid, while Yantian port in Shenzhen was closed in May. China’s economy is already slowing due to factors such as stringent virus control measures and tighter restrictions on the property market, and the energy crunch will add to that. Lu Ting, the chief China economist at Nomura Holdings Inc in Hong Kong, noted that the ‘hottest topic about China will very soon shift from ‘Evergrande’ to ‘Power Crunch’. It is difficult to predict the full impact of the shortage on production’.
Apple Inc.’s key partner, Pegatron Corp., said on Monday that its iPhone assembly operations in China are reducing their energy consumption. In order to comply with local government policies, the company is taking energy-saving measures. Nonetheless, the firms responsible for producing Apple’s handset have avoided drastic cutbacks in their operations so far and are reportedly receiving preferential access to energy. The Chinese Communist Party’s official newspaper, the People’s Daily, indicated in a Sunday editorial that the shortages would force companies to raise prices for Chinese consumers. Government officials in northeast Liaoning province urged local regulators to prevent power curbs from affecting production and households. As the power crisis spreads from factories to homes, State Grid Corporation said Monday it will try its best to avoid power cuts.
Read more: Why passengers always board planes on the left: Real reasons…
A power shortage will inevitably affect both heavy industries such as aluminum and steel, as well as downstream industries. Guangdong’s energy administration announced Sunday that factories have already implemented large-scale energy cuts. Bocom International’s head of research and chief strategist Hao Hong said no one knows when a supply chain bottleneck will be overcome. However, it is looking ominous for this winter. Chen Yubing, manager of Suzhou Berya Textile Technology Co Ltd., an exporter of polyester and nylon fabric in Zhejiang, said the suspension has resulted in his company suffering ‘huge losses’. In September, the company’s production lines were only allowed to run three days a week, but the new order on Monday allows them to run every other day. Half of the company’s sales come from overseas.
Post Your Comments