The last few days have been tough for both Chinese factories and whole production chains, and citizens—problems with the electricity supply appeared in the country, engendering temporary power cuts and even long-lasting blackouts. As a result, it caused slowing down the work in factories or even the complete discontinuation of production. If this situation lasts for a more extended period, it will significantly impede trade with China. Why have power outages in China appeared? What should importers do?
Power outages in China mainly affected residents and businesses in the northern-eastern and eastern parts of the country, in provinces such as Guangdong, Shandong, Jiangsu, Liaoning, Jilin, and Heilongjiang. Not only entrepreneurs but also citizens feel the effects of this situation. There is no heating in some of the buildings, and elevators are out of order. Selected places have been deprived of traffic lights. Meanwhile, the demand for electricity rises, and Chinese factories struggle with its sudden deficiency. Why is this happening?
Why is China reducing its electricity supply?
The mentioned rise in the demand for electric energy is mainly associated with the economy’s recovery after its stagnation during the worst period of the pandemic. Import from China has gained much more interest, and simultaneously the work of factories, which need a huge amount of electricity, has increased. Along with the demand for electric energy, the coal prices used for its production have also surged. However, energy companies didn’t get permission to raise rates that would cover the costs of coal. Thus, some of them were closed, and many others have been operating below full capacity.
Therefore, curbing electricity supply in China is caused by:
- Dynamic rise of demand for electric energy
- Quickly surging prices of coal and gas
- The government’s order to reduce greenhouse gas emissions
Among others, the consequences of this situation were felt by Dongguan in Guangdong Province, which is an important production center in China. Suppliers from the city manufacture goods from various industries, e.g., clothing, footwear, or toys. Many of them specialize in assembling electronics and electrical devices. Authorities issued a warrant there to cut the power supply to many factories, which will lead to delays in production and delivery of goods to international importers.
What might be the consequences of power outages in China?
As we mentioned, power outages in China will primarily cause work interruptions in factories and significant difficulties in the manufacturing process. These are very unfavorable conditions for international trade with China, especially considering the upcoming Christmas Season. If the situation is to last longer, companies might encounter problems importing their products at a desirable time.
Moreover, some factories have already been forced to rent costly power generators to continue their work. According to one of the companies, the costs of renting such a generator and buying diesel oil are twice as high as the electricity delivered before. It influences the rise of production costs, impacting the total price of goods, e.g., smartphones manufactured in China.
Among factories currently facing difficulties with electricity supply are outsourcers of global leaders on the market, such as Apple, Tesla, or Intel.
Power outages in China – What can importers do?
In such a difficult time for an increasing number of factories, constant communication with a supplier is the most crucial. It’s worth contacting the manufacturer of your products and finding out if this problem influenced their factory. You need to be aware of that, as power outages will cause delays in deliveries and a rise in import prices. Furthermore, if you’re expecting your goods to arrive in the fourth quarter of 2021, we recommend ensuring they’ll be there on time. Reducing the electricity supply may extend the delivery time until after the Chinese New Year.
There is no certainty about how long the power outages in China will last. Thus, we recommend staying in touch with your business partner. In this way, you’ll know whether the situation is changing and how it will impact your import from China.