Nationwide power curbs, caused by many factors including a steep jump in coal prices and surging demand, have led to side effects at Chinese factories of all kinds, with some cutting output or halting production entirely. Industry insiders predict the situation could worsen as the winter season draws near.
As production halts caused by power curbs challenge factory production, experts believe that Chinese authorities will launch new measures – including a crackdown on high coal prices – to ensure a steady electricity supply.
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.
“The power reductions surely had an impact on us. Production has been halted, orders are suspended, and all our 500 workers are off on a month-long holiday,” a manager of the factory surnamed Wu told the Global Times on Sunday.
Apart from reaching out to clients in China and overseas to reschedule fuel deliveries, there is very little else that can be done, Wu said.
But Wu said that there are over 100 companies in Dafeng district, Yantian city, Jiangsu Province, facing the similar predicament.
One likely reason causing the electricity shortage is that China was the first to recover from the pandemic, and export orders then flooded in, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times.
As a result of the economic rebound, total electricity use in the first half of the year rose more than 16 percent year-on-year, setting a new high for many years.
Due to resilient market demand, commodity prices and raw materials for basic industries, such as coal, steel, and crude oil, have risen worldwide. This has caused electricity prices to surge, and “now it is rather common for coal-fired power plants to lose money as they generate electricity,” Han Xiaoping, chief analyst at energy industry website china5e.com, told the Global Times on Sunday.
“Some are even trying not to generate electricity in order to stop economic losses,” Han said.
Industry insiders predict that the situation may worsen before it gets better, as the inventories of some power plants are inadequate while the winter season rapidly approaches.
As the electricity supply tightens in the winter, in order to guarantee power supplies during the heating season, the National Energy Administration recently held a meeting to deploy coal and natural gas production and supply guarantees this winter and also next spring.
In Dongguan, the world-class manufacturing hub in South China’s Guangdong Province, power shortages have put companies such as Dongguan Yuhong Wood Industry in a tough situation.
The company’s wood and steel processing factories face caps on electricity use. Production is banned from 8-10 pm, and electricity should be reserved for sustaining daily life of the public, an employee surnamed Zhang told the Global Times Sunday.
Work can only be done after 10 pm, but it may not be safe to work so late at night, so total working hours have been cut. “Our total capacity had been decreased by about 50 percent,” Zhang said.
With supplies tight and loads at a record, local governments have urged some industries to reduce their consumption.
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.
The announcement also urged people to set air conditioners at 26 C or above.
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.
Despite the short-term pain, industry experts said that in the long run, the curbs will enable power producers and manufacturing units to participate in the nation’s industrial transformation, from high-power to low-power consumption, amid China’s carbon reduction bid.