China’s power crisis is getting worse as admissions from government bodies, companies and local governments emerged into the media on Monday.
Reuters reported Monday night that widening power shortage have halted production at numerous factories “while some shops in the northeast operated by candlelight and malls shut earlier as the economic toll of the squeeze mounted.”
Other reports on Monday said that several key suppliers of Apple and Tesla (which is based in Shanghai) halted production at some plants.
The northern provinces of Liaoning, Jilin and Heilongjiang all suffered blackouts over the weekend, Caixin magazine reported, with cuts to traffic lights wreaking havoc during rush hour and shopping malls forced to close hours before time.
Authorities in Inner Mongolia, an autonomous region in northern China, had ordered heavy industries, including an aluminium smelter, to cut their power use so the province could achieve its first-quarter energy use targets. Similar requests were made in Guangdong, the country’s exporting powerhouse province in the south.
The power crisis has, thus, dealt a blow to near-term economic forecasts for the country, even as cuts in the country’s growth outlook loom large.
At least 15 Chinese companies have said in stock exchange releases that production had been disrupted by power curbs, while more than 30 Taiwan-listed firms with China operations had stopped work to comply with the power limits.
The steel, aluminium and cement industries have also been hard hit by the output curbs, with about 7% of aluminium production capacity suspended and 29% of national cement production affected.
Morgan Stanley analysts wrote in a Monday note. They said paper and glass could be the next industries to face supply disruptions.
Producers of fertilsers, chemicals, dyes, furniture and soymeal have also been affected.
China Daily, a central government-controlled website and paper reported on Monday night that Guangdong province had moved “to ensure steady power supply” a rare admission that there is a problem at a province wide level.
Guangdong is China’s biggest and most important province in terms of population and business. It’s GDP was estimated at $US1.7 trillion in 2020, making it larger than Australia’s.
It’s been China’s most productive province for 32 years so for news of power rationing and other attempts to soften the impact of the shortage to emerge into public eye, even in the China Daily, is an admission that the problem is now too big to hide.
“Guangdong province has introduced staggered peak power consumption rules to ease the heavy pressure on electricity supply — which has brought shortages — and to help ensure the safe operation of the power grid,” China Daily reported.
“Sources in the Guangdong Bureau of Energy said on Monday that many companies and factories have been ordered to operate for three days only, after having stopped production for four days, in the Pearl River Delta, one of the world’s major production bases. Priority will be given to residential power consumers and the province’s service industries.
The paper reported that demand for power in the province was up more than 17% this year and this is before the peak late summer, early autumn demand period, and then the surge in demand for the winter heating season starting in mid-November.
The crisis also emerged in a report on Monday in the most virulent of all Chinese state media, The Global Times which reported that:
“A textile factory based in East China’s Jiangsu Province received a notice from local authorities about power cuts on September 21. It won’t have power again until October 7 or even later…. Guangdong issued an announcement on Saturday, urging tertiary industry users such as government agencies, institutions, shopping malls, hotels, restaurants and entertainment venues to conserve power, especially during peak hours.”
That rise in demand for power in one of China’s most important and productive provinces (it neighbours Hong Kong and numbers some of the country’s biggest producers and exporters of a raft of consumer and industrial goods) has run slap bang into the central government’s demand that energy intensity (ie the consumption of coal, oil, gas etc) be cut by 3% in 2021 to help China meet lower carbon emission levels ahead of the Glasgow climate conference in November.
Outside Guangdong, power 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.
With high coal prices, and shortages of electricity and coal, there is also a shortage of electricity in Northeast China. Power rationing began in many places last Thursday.
The entire power grid in the region is in danger of collapse, and residential power is being limited, the Beijing News reported on Sunday.
On Monday, State Grid Corp pledged to ensure basic power supply and avoid electricity cuts and on Sunday the National Energy Administration (NEA) has told coal and natural gas firms to ensure sufficient energy supplies to keep homes warm during winter.
China’s power crunch has been caused by tight coal supplies (made tighter by the silly ban in 2020 on imports of coal from Australia) and tougher emissions standards.
This has seen production cut in industries across several regions and is starting to drag on the country’s economic growth outlook.
Ahead of the start of the seven-day National Day break on Friday, china’s two start of month activity surveys on manufacturing and services is likely to show a further slowing in the pace of business, thanks to the power cuts and rationing, as well as the demand for lower emissions.
But the holiday will delay the release of monthly and quarterly economic data for China by a week to 10 days, so any impact, especially on production and retail sales (which weakened in august) won’t be known until late October.
Liaoning province in the north on the North Korean border (and cold already) said power generation had fallen sharply 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, according to translations of local media reports.
Reuters said 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 said that many shopping malls were closing earlier than usual at 4 p.m.
To meet the promise of the 3% cut in energy intensity this year, the central government has imposed cuts and quotas on provincial governments which in many cases have missed their targets.
The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks (off the back of continuing scattered outbreaks of Covid Delta which is adding to the problems).
