China’s energy crisis is shaping up as the latest shock to global supply chains as factories in the world’s biggest exporter are forced to conserve energy by curbing production.
The disruption comes as producers and shippers race to meet demand for everything from clothing to toys for the year-end holiday shopping season, grappling with supply lines that have been upended by soaring raw material costs, long delays at ports and shortages of shipping containers.
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Chinese manufacturers warn that strict measures to cut electricity use will slash output in economic powerhouses like Jiangsu, Zhejiang and Guangdong provinces -- which together account for almost a third of the nation’s gross domestic product -- and possibly drive up prices.
Local governments are ordering the power cuts as they try to avoid missing targets for reducing energy and emissions intensity, while some are facing an actual lack of electricity.
Clark Feng, whose Vita Leisure Co. buys tents and furniture from Chinese manufacturers to sell overseas, said electricity curbs in the eastern province of Zhejiang, where the company is based, have dealt another blow to businesses. Fabric makers in the province that are suffering production halts have started to hike prices and postpone taking new overseas orders, he said. “We were already struggling to ship goods overseas, and now with the production capacity restriction, it’s definitely going to be a huge mess,” said Feng. “We already had to deal with so many uncertain factors, and now there’s one more. It will be harder to deliver orders, especially for the holiday season.”
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Yiwu Huading Nylon Co. Ltd., a maker of synthetic fabric nylon in Zhejiang, suspended half of its production capacity since Sept. 25 in response to the local government’s order to cut electricity consumption, according to a stock exchange filing Monday. The company expects output to resume from Oct. 1 and said it will look to minimize the impact of the closure.
The power problems come after recent port disruptions in China rippled across global supply chains. Part of Ningbo port, one of the world’s busiest, was idled for weeks last month following a Covid outbreak, while Yantian port in Shenzhen was shut in May. The energy crunch will weigh on China’s economy at a time when it’s already slowing because of factors such as stringent virus control measures and tighter restrictions to rein in the property market.