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China’s Power Crisis Hits Manufacturing

Amid tight power supplies and soaring coal prices, power outages in China have started to hit factories of various energy-intensive industries, sparking renewed fears about larger disruptions to global supply chains on top of the COVID-related issues.

As coal prices surge amid a global energy crunch, Chinese authorities are mandating restrictions in energy use, which have led to outages at factories and homes.  

The power crunch has reached the automotive industry and workers at GAC Aion, the electric vehicle unit of the largest state carmaker, Guangzhou Automobile Group, have been told to turn off air conditioning, lights, printers, and other office equipment when not in use, in order to conserve energy that’s not critical for car manufacturing, Bloomberg reports.

GAC Aion relies on its photovoltaic (PV) solar power generating units to ensure enough electricity supply for car manufacturing, while production is not affected by the power supply curtailments, the company told Bloomberg.

The rationing of power to factories has now spread to homes, with Chinese cities suffering widespread blackouts.

Power supply rationing started last week during peak hours, residents of the city of Changchun in northeastern China tell local media.

At Chinese factories, the power cuts have affected manufacturing sites that supply Apple and Tesla, among others, Reuters reported on Monday. Some suppliers of the two large U.S. companies have halted production in China amid the power crisis.

Apart from the automotive and semiconductor manufacturing industries, Chinese producers of steel, aluminum, furniture, toys, and dyes are also hit by the outages.

Analysts have started downgrading their estimates of China’s economic growth this year, also due to the high energy prices and the power crunch. Goldman Sachs, for example, revised down on Tuesday its forecast of Chinese economic growth to 7.8 percent this year, down from 8.2 percent growth expected earlier.  

By Charles Kennedy for Oilprice.com

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