China’s top state-owned energy companies have been ordered to ensure there is enough fuel supply for the coming winter at all costs, a report said on Friday, as the country grapples with a power crisis. Due to which there is a danger of affecting growth in the world’s number two economy.
The country has been hit by widespread power cuts, which have shut down or partially closed factories, affecting production and global supply chains.
The crisis has been caused by a confluence of several factors, including rising foreign demand as economies reopen, record coal prices, state electricity price controls and tougher emissions targets.
More than a dozen provinces and territories have been forced to ban energy use in recent months.
Bloomberg News, citing people familiar with the matter, reported on condition of anonymity that Vice Premier Han Zheng had told energy companies to make sure there was enough fuel to keep the country running and Beijing to tolerate the blackout. will not.
Han, who oversees the country’s energy sector and industrial production, was speaking this week at an emergency meeting with officials from Beijing’s state-owned asset regulator and the Economic Planning Agency, the people said.
“This is probably a strong indication of how concerned China is about keeping the industry running, and more importantly, that winter is on the way,” said Jeffrey Haley, senior market analyst at OANDA.
About 60 percent of the Chinese economy is powered by coal, but supplies at the world’s biggest coal importer have been disrupted by the pandemic and squeezed by a decline in imports amid a trade dispute with Australia.
Utilities were unable to purchase enough fuel following the rise in prices due to increased demand for electricity from factories in China.
The country’s environmental agenda is compounding the crisis, with pressure to reduce coal burning and halt the development of coal mining, with President Xi Jinping promising his country will become carbon neutral by 2060.
Data released on Thursday showed China’s factory activity contracted last month for the first time since February 2020, when the country was essentially shut down by a lockdown as authorities battled the first coronavirus outbreak. .
Han’s statement raised concerns that already high commodity prices could escalate further.
“The order, to me, implies that we are by no means on the verge of a cool-off. Rather it looks like it will get even more insane,” said Bjarne Shildrop, an analyst at SEB.
“They will bid whatever they want to win a bidding war” for cargo of coal or liquefied natural gas.
Power shortages prompted banks Nomura and Goldman Sachs to cut their growth forecasts for China this year, anticipating further disruption in production.
Factories supplying multinationals such as Apple and car maker Tesla are among those who have been asked to temporarily halt production.
“If Chinese steel and aluminum smelters are going to close for an extended period of time, you can be sure that the reverberation will reverberate through global supply chains,” Hailey said.
A factory worker in Dongguan’s industrial hub told AFP this week they were working overnight after being forced to stop production during the day.
“Of course we are unhappy … but we are going with the hours when there is a power outage,” he said.
Chinese coal futures rose to a record low on Thursday as the country grapples with fuel shortages ahead of the national holiday, with many factories shut for a week-long break.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)