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China Power Cuts Gives Shippers Another Variable to Contend With

China Power Cuts Gives Shippers Another Variable to Contend With

Factories in at least ten Chinese provinces have either closed temporarily or cut output this month, after government-imposed power cuts to curb carbon emissions. By Friday, at least 10 publicly listed companies told the Shanghai and Shenzhen stock exchanges their factory output had been hit by the power cuts, and their 2021 earnings could be adversely affected.

The cuts followed China’s economic planning agency, the National Development and Reform Commission’s, release of a “dual-control” plan to restrict energy-intensive activities and consumption. The plan commands provincial governments to ration electricity consumption to control emissions in line with President Xi Jinping’s target for carbon emissions to peak by 2030, and to achieve carbon neutrality by 2060.

The affected provinces include Jiangsu, Guangdong and Zhejiang, which are among the most industrialised in China, their factories producing steel products, plastics, home appliances, chemicals and textiles and account for up to one-third of China’s manufacturing output. All three provinces had received ‘red ratings’ for missing consumption targets.

The provinces are also home to China’s busiest ports, Ningbo, Guangzhou, Nansha, Yantian and Shekou and Jiangsu province lies along the Yangtze River Delta and its container exports are usually processed by Shanghai or Ningbo.

As this is the peak season for container shipments to US and European retailers, the new moves could exacerbate delays in receiving shipments at the ports, especially when the power cuts last beyond the end of September. Congestion on the US west coast is already seeing shipments being held up, with some 70 ships waiting outside Los Angeles and Long Beach due to surging imports and insufficient trucking and land-based logistics and this latest development will only exacerbate it.

Most of China’s electricity supply is coal-fired and, although the affected industries can use renewable energy such as wind energy as a substitute, the transition will not happen overnight.

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