European companies based in China have sounded the alarm: repeated power cuts are all the more difficult to manage when information falls on the same day. “Many companies have to delay deliveries, their customers are so unhappy that some may have to cancel orders”, described Klaus Zenkel, vice president of the European Chamber of Commerce in charge of southern China, Wednesday, October 13. The energy crisis that has hit China since the end of August penalizes the economy, to the point that the IMF has revised its growth estimate for the country from 8.1% to 8% in 2021.
Energy supplies improved slightly in China, after several catastrophic days in late September that saw entire cities plunged into darkness, including traffic lights. Since then, the Chinese authorities have made it the top priority. From October 15, electricity producers will be able to sell their energy 20% more expensive than the tariff set by the State and thus pass on to their customers part of the costs of raw materials, which have soared in recent months. In September, factory price inflation already reached 10.7%, its highest level in China since this measure was introduced in 1996.
At the origin of the power cuts, the lack of coal
At the origin of the power cuts which hit most of the Chinese provinces, the lack of coal. The faster-than-expected recovery of the global economy led to strong demand for Chinese manufactured goods: in September, exports rose 28.1% year-on-year. All over the world, commodity prices have jumped. In China, where coal still represents 57.7% of energy production, it is the price per tonne of this ore that matters most: it has tripled in the past year to exceed 1,640 yuan on October 13. “There was a mismatch between demand and supply. On the one hand, coal prices are rising, on the other hand, electricity prices are set by the state. As a result, the power plants found themselves losing money, explains Yan Qin, senior analyst for research firm Refinitiv. They hesitated to replenish their coal stocks, and even voluntarily reduced their energy production, rather than producing at a loss. “
At the end of September, the NDRC, the commission responsible for planning the economy, called on coal mines to step up production. But this week, Shanxi, the country’s second-largest producing province, had to close 60 mines following heavy flooding. Several of them have yet to reopen. In anticipation of the cold season, which is now starting in northern China, the authorities have also called on the power plants to “ do everything To ensure their stock of coal.
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