From S&P Global Platts:
Chinese electricity and generating fuels supply are in focus this week, as utilities grapple with higher commodity costs. Plus, high freight rates discourage polymer exports from Asia to Europe, and Latin American crude supply finds favor in Asia.
1. Chinese provinces impose power cuts as authorities try to cool demand
What's happening? In early June, China's National Development and Reform Commission asked all provinces to reduce their energy consumption to cool a surge in electricity demand observed for the first part of 2021. However, only 10 out of 30 mainland Chinese regions achieved their energy reduction targets by the end of the first half of 2021, and the country experienced high power demand growth for July and August. In mid-September NDRC announced tougher punishments for regions that fail to meet their targets and said it would hold local officials accountable. Consequently, power cuts are now taking place in certain provinces. Companies operating in the manufacturing industry seem to be hit hardest, while impact on residential power supply is localized to just a few markets.
What's next? S&P Global Platts Analytics believes power supply cuts could be over by Nov. 15, which is the official start date of the winter heating season. Platts Analytics also believes the higher spot commodity (coal, gas) prices is causing some concern for utilities, which are unwilling to pay higher prices if these higher costs cannot be passed onto electricity prices. Electricity prices are heavily regulated, and any change needs to be implemented by the government....
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