How China power shortages affect our lead time?

December 19, 2020

China's Zhejiang, Hunan and Jiangxi provinces, along with the autonomous region of Inner Mongolia, had restricted the electricity usage of industry and government agencies to combat the shortages of electricity and coal, effective since Dec. 14, several local industries said Dec. 17.

Several local industries and government organizations in Zhejiang province in eastern China received an urgent notice to stop production and prohibit the use of heaters above 3 degree Celsius, a source close to the matter said.

The move was part of Chinese efforts to cool down thermal coal prices as the availabilities of seaborne and domestic coal shrank further in preparation for harsher winter weather, sources said.

Electricity usage in China during winter this year is expected to be up about 9% on the year due to colder temperatures, a trader said.

The move follows China's Dec. 12 easing of the entry of imported coal to bring down domestic coal prices, sources said.

A national library, Yiwu Library in Zhejiang, shortened its operating hours, switched off heaters and reduced the use of lights, effective Dec. 16, the library said on its official social media platform Dec. 16.

Zhejiang province, on China's east coast, is close to port destinations for seaborne and domestic materials, so the introduction of restrictions to power usage came as a surprise to the market, sources said.

"It was not a regular practice until this year," a China-based trader added.

Market sentiment and coal usage in Zhejiang inching lower on the restrictions could suppress seaborne and domestic coal prices, a local utility source said.

However, Chinese domestic coal offers for 5,500 kcal/kg NAR grade were heard at Yuan 800/mt FOB ($122.45/mt) Dec. 17, up Yuan 20-40/mt on market price indications heard Dec. 16.

Indonesian and Russian coal prices continued to increase on a flurry of trades into China as well, sources said.

"The direction of Chinese coal prices depends on the nationwide stocking activities ahead of the Lunar New Year," a trader said.

Landlocked regions

Landlocked regions in China's Hunan, Jiangxi and Inner Mongolia had also implemented several measures to control the use of electricity during winter, sources said.

Hunan and Jiangxi in southern China were discouraging the public from excessive power use during peak periods in the morning and late afternoon, according to sources.

A similar practice was implemented in Hunan last year due to its limited access to energy sources, a trader said.

Inner Mongolia was expected to be short by 30 million kW during winter this year, and had started managing electricity shortages since the start of the fourth quarter this year, sources said.

Other coastal provinces including Fujian in southern China may restrict electricity usage as well, several traders said.

"Some of the power plants will stop running soon due to the shortages of coal," a trader said.

Will This Affect Yorkn Orders' Lead Time

Yes, and no. The shortage ends until Dec 31, 2020. This will add additional week production to our concurrent orders that are produced in Zhejiang, Hunan and Jiangxi provinces. It will be back to normal after Jan 1, 2015. 

Chinese New Year Shutdown

Most factories will shutdown 2 weeks before Chinese New Year (Feb 12, 2021), and reopen around Feb 28, 2021. Some factories may take couple of more weeks to go back to normal due to shortage of workers and COVID19.

Source: https://www.spglobal.com/

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