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China’s electricity cuts & coal deficiency: What does this mean to the shipping industry?
China’s electricity cuts & coal deficiency: What does this mean to the shipping industry?
Living in a post-Covid-19 world, China is in an excellent position to lead the worldwide shipping industry and become a global innovation and knowledge center for sustainable transportation.
Following the pandemic, the world's economic center of gravity shifted to China and East Asia, and China now has the world's most connected shipping networks. China partnered up with more than 120 countries and regions, and it has seven of the world's ten largest ports.
Despite these optimistic expectations, China is once again making worldwide headlines, but this time not in the health department but in the worldwide economic one: China is attempting to take a “short-term risk for a long term benefit” by spreading electricity shortages in more than 2/3rd of its provinces.
What is happening in China?
Recently, news about President Xi Jinping’s target for carbon emissions to peak by 2030 and achieving carbon-neutrality by 2060 sent tremors of fear among major industrial cities.
The Government handed notices to factories in 21 of the 31 provinces about rationing measures in electricity and the schedule of the days when they will face power outages. This caused halts in production, failure in abiding to delivery dates and major losses everywhere.
One other major issue the country is facing: Rising coal prices.
According to experts, the price of coal has doubled in those two years, causing electricity costs to explode. Industrial and commercial companies are now facing the reality of purchasing electricity at market prices rather than the normal electricity prices which used to be kept at low costs.
For a long time, China has mostly been reliant on coal as the main combustible used in power plants, with studies even suggesting that more than 72.1% of its electricity is coal-derived.
The spike in coal prices has also been attributed to a supply shortage on the market. This resulted in two significant issues:
1- China is ahead of one of the busiest months of the year because of the upcoming holidays
2- We are also getting close to the coldest season of the year, where priority in coal usage is given for residential consumption.
To add insult to injury, China has banned the import of Australian coal and is now attempting to buy coal from all over the world to compensate for the loss of its Australian suppliers.
What will happen to the shipping industry?
First of all, electricity rationing is attaining the industrial sector and the major ports of China. China’s major ports such as: The port of Ningbo, Guangzhou, Nansha, Yantian and many more, are the first to suffer.
Power outages mean fewer working hours which means delays in shipping. While consumer demand is projected to be high throughout the holiday shopping season, supply lines are being slowed by rising raw material costs, port delays, and a lack of shipping containers. Supply chains and delivery may suffer as a result of this.
In addition to that, a deficiency of essential commodities such as coal will make the cost of production higher. With a “domino effect”, we may face higher shipping costs and as mentioned previously, delays in shipping.
How we can help you:
Global Clearing & Forwarding is just like many other major and minor shipping companies and as the saying goes “We are all in this together”.
We will keep ourselves updated on this situation by staying in touch with our partners in the region and discussing with them the situation as it progresses and the potential impacts it may provoke.
With China hosting the Winter Olympics in February 2022, its state-imposed power outage is a decision taken to clear the air and clean the atmosphere of China before welcoming foreigners and competitors coming from different countries.
In other words, the electricity rationing measures are expected to ease up progressively.
We know that these measures may provoke delays and disruptions. This is why we will work on solutions and trace possible scenarios to avoid or minimize any problem you may run into.
What you can do:
It’s all about teamwork!
We ask you to follow-up these three issues:
- Keep in touch with your vendors and stay updated concerning your order, its expected delivery time and the possible disruptions
- Keep in mind that everything is delayed, the earlier you order the better it is for your workflow
- Reach out to us and keep us updated so we can assist you in any way possible
In conclusion, we must stay alert and always up to date with the latest news in economics & the world of shipping. We may expect changes hopefully soon, but in the meantime, we ask you to remember that we at GCF are always here to help you in any way possible and want to ensure that you get the best service 24/7.