Will China’s Power Cuts Impact Your Import?

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China is facing its most serious power shortage in a decade. Since last week, we heard more and more news about China’s power cut in many provinces. The shortage of electricity not only caused manufactories output reduction nationally, but also influenced some areas’ residents daily livelihood. For manufacturing, till now, current situation is: some industries manufactories produce 4 days and rest 3 days, some industries work 2 days rest 5 days, while some textile plants can only produce 1 day and rest 6 days.

An extreme event: a pregnant citizen of Shenyang city Liaoning province Mrs Liu climbed 24 floors to get at her home on 23th September. The three provinces in Northeast China: Heilongjiang, Jilin, Liaoning are experiencing quite serious electricity shortage, caused by the high price of coal used for power generation. China government compensate a big part for residents’ power price, recently the coal used for coal-fired power station cost price doubled as lacking of coal and high power consumption. These would be the direct reason for the power cuts.

Currently China Coal-fired power takes about 73%,  hydropower about 11.6%, nuclear power about 5%. People estimate the power shortage maybe last until March, 2022.

Will China’s Power Cuts Impact Your Import?插图

While China is busy producing for the whole world since late 2020, the power consumption hit all-time high last week. Eleven provinces including manufacturing hubs like Guangdong, Zhejiang, Jiangsu, Anhui, Shandong etc already start the power rationing which possibly could last through the end of the year. More provinces join in later for the power cuts. Factories’ production are heavily disrupted and output greatly decreased, the direct impact on China’s export would be: delivery postpone and keep increasing cost price…

For the cost price, raw mateiral aluminum has surged another 10%, and it is estimated would hit rmb25000 per ton in the near future. Many manufacturers’ pricing strategy accordingly: offer a roughly price first, they will either limit the valid date to 1 week, some even 3 days or 1 day, or just say: we need to double check the final price when buyers decide to place order. For us as a Chinese supplier quite familiar with manufacturing industries, it is understandable as many suppliers’ margin is quite low and can’t take the big fluctuation of raw materials price. Please understand and don’t blame your Chinese supplier or any seller, complaining they adjust price too frequently in 2021, as no one could predict the raw materials cost price surge so unbelievable high….

But we have to make it clear that: China is not the winner, raw materials are controlled by abroad, China import raw materials and just contribute Chinese labors and resources to produce, then export the goods. Remember the blooding truth in the tough 2021: many Chinese factories are busy but not making money. China’s power cuts to some degree objectively helps to lower the risk of trade imbalance in post pandemic times.

Back to business, our sincere suggestion would be: in current situation, don’t hesitate when you plan the order, the earlier the better, if you choose to wait and see for the lower down, tomorrow may be more disappointing.

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