Tue, Oct 12, 2021 page10

• Liaoning warns of more power cuts

  WORSENING SHORTAGE: The Chinese province finds itself short of between 10 and 20 percent of demand as power curbs are put in place and winter approaches

  • Reuters, BEIJING
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  China’s largest provincial economy in its northeast rust belt yesterday warned of worsening power shortages, despite government efforts to boost coal supply and manage electricity use in a post-COVID-19 pandemic energy crisis hitting multiple countries.

  Liaoning Province yesterday issued its second-highest level power shortage alert, the fifth in two weeks, saying the shortfall could reach nearly 5 gigawatts (GW).

  Liaoning has the biggest economy and consumes the most power of the three provinces making up China’s rust-best industrial region. It has been suffering widespread power cuts since the middle of last month. A level 2 power shortage alert indicates a demand gap of 10 to 20 percent of total power demand.

  

  People walk past electricity towers in Shenyang, Liaoning Province, on Sept. 29.

  Photo: Reuters

  The rebound in global economic activity as COVID-19 restrictions are lifted has exposed shortages of fuels used for power generation in China and other countries, leaving industries and governments scrambling as the northern hemisphere heads into winter.

  “The biggest power shortage could reach 4.74 gigawatts on Oct. 11,” a notice issued by the Liaoning Provincial Industry and Informatization Department said.

  An order to curb power use had been put in place from 6am, it said.

  The province also issued level 2 power crunch alerts for each of the last three days of last month, when the daily power supply gap reached as much as 5.4GW, leaving hundreds of thousands of households without electricity and forcing industrial plants to suspend production.

  The power shortages follow tightening supply and skyrocketing prices for coal, used to generate more than 70 percent of electricity in the region.

  Wind farms have also been idled due to slow wind speeds. Wind power made up 8.2 percent of Liaoning’s power generation last year.

  Last week, China’s top two coal mining regions, Shanxi and Inner Mongolia, ordered more than 200 of their mines to expand production capacity and prioritize coal supply to power plants in northeastern provinces, including Liaoning.

  However, analysts and traders expect coal output would still fall short this winter, and China would still have to cut industrial power consumption by about 12 percent in the fourth quarter.

  Meanwhile, China’s decision to allow electricity prices to rise to ease a worsening energy crisis would add to inflation pressures at the same time that the economy is slowing.

  The Chinese State Council said on Friday that power prices would be allowed to rise by as much as 20 percent against a benchmark, double the level of the current cap, a move that would make it profitable for electricity producers to boost supply, while also curbing users’ demand.

  Nomura Holdings Inc chief China economist Lu Ting (陸挺) estimated that the impact on consumer price index (CPI) could be about 0.4 percentage points, while the effect on the producer price index (PPI) could be bigger, given higher costs for energy-intensive industries.

  Analysts led by Sun Binbin (孫彬彬) at Tianfeng Securities Co Ltd (天風證券) said in a report on Sunday that the power hikes could result in a 1 percent rise in PPI and 0.5 percent increase in CPI.

  “The pressure for manufacturers to pass on price increases to the downstream is increasing,” said Bruce Pang (龐溟), head of macro and strategy research at China Renaissance Securities Hong Kong (華興證券香港).

  Factory inflation is likely to remain elevated in the coming months, with the full-year increase in PPI likely to reach more than 9 percent, he said.

  Additional reporting by Bloomberg

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