China puts pressure on energy companies amid blackouts

China puts pressure on energy companies amid blackouts
China puts pressure on energy companies amid blackouts

Chinese authorities have ordered major state-owned energy companies to ensure adequate fuel availability as winter approaches, press reports said Friday, as the country faces power outages that threaten to dent growth in the world’s second-largest economy.
The electricity outages recorded in the recent period have caused the complete or partial closure of factories, affecting production and global supply chains. This crisis is due to a series of factors, including an increase in global demand for energy resources with the revitalization of the economic cycle, record prices for coal at the local level, and state controls on electricity prices and emissions reduction goals, according to what was reported by “Agence France Presse”.
In the past months, more than ten provinces and regions have had to impose restrictions on energy consumption.
And “Bloomberg” agency reported, quoting informed sources, who requested anonymity, that Chinese Vice Prime Minister Han Jing told energy companies of the need to provide enough fuel to ensure the continuity of economic activity in the country, and that Beijing will not tolerate power outages, according to what it reported. Agence France-Presse.
The sources indicated that Han, who oversees China’s energy and industrial production sector, was speaking during an emergency meeting this week with officials from the state’s Asset Regulatory and Economic Planning Agency.
Statistics published yesterday (Thursday) showed a decline in factory activity in China for the first time since February 2020, coinciding with the country’s entry into a wide closure in the face of the first outbreak of the “Corona” virus.
And the statements attributed to Han raised fears that the prices of raw materials, which are already high, will witness an additional increase. This demand, said Bjarne Schieldrop, an analyst at SEP, “means for us that we’re not about to see a lull in prices. On the contrary, things seem to be heading for an extra (high) frenzy.”
He added that companies may “spend everything possible in order to win an auction for a shipment of coal” or liquefied natural gas.
The current crisis prompted bank “Nomura” and “Goldman Sachs” this week to lower their forecasts for growth in China this year, with the possibility of causing additional disruptions in supply and production chains.
The crisis affected factories that produce materials for giant international companies such as “Apple” and “Tesla”, and were asked to suspend production.
A note issued by Capital Economics this week warned that “the power shortage is unlikely to abate soon.”
A worker at a factory in Dongguan Industrial District said this week that they started working night shifts after being asked to stop production during the day.
He explained, “Of course, we are not happy (…), but we are adapting to the hours of electrical rationing.”
Coal futures hit record levels Thursday in China, as the country suffers from a shortage of this fuel, which is widely used to provide energy.

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