China’s floods, power crunch & Cyclone Kompasu hitting global supply chains

268 Views

Rapidly rising coal consumption since the 18th-century Industrial Revolution has contributed to global warming. Nowadays, our changing climate is getting its own back as extreme weather conditions become more frequent worldwide. Adding insult to injury, Cyclone Kompasu has just shut down Yantian Port, one of the world’s busiest, with container pick-up and drop-off operations suspended. The number of ships waiting outside the port rose to 67, the most since August 26.

What’s more, China has again been hit by severe flooding, e.g., in the northern province of Shanxi. The floods in this major coal-producing province have forced the Chinese government to suspend production at 60 coal mines, 372 non-coal mines, and 14 dangerous chemical factories in Shanxi. As China battles its worst coal shortages and power crunch in years, 72 mines in neighbouring Inner Mongolia, China’s second-biggest coal-producing region, have been ordered to increase their coal production by 98.35 million tonnes.

 

Chinese factories and ports affected

China’s power crunch is hitting manufacturing output as factories are being told to curb their electricity usage. Economic powerhouses such as Jiangsu, Zhejiang and Guangdong provinces – together accountable for nearly a third of China’s GDP – are already feeling the pinch, and the knock-on effects felt throughout global supply chains. Disrupted operations at major Chinese ports – Ningbo idle for weeks in August following an Covid-19 outbreak, Yantian shut down in May and again now because of the cyclone – are exacerbating the effects of shortfalls in manufacturing output caused by China’s power shortages. Already, importers in North America and Western Europe are warning consumers they might not be able to get the presents they intended to buy for the holiday season.

 

Lead times from Chinese to EU ports increasing

The impact on global supply chains of China’s current power crunch and reduced industrial output is just one side of the coin. Over the past two years, the total transit time for a containership from the port of load to the port of discharge (including time spent at ports en route or at anchorage at the transshipment or destination port) has gone up significantly.

 

Container lead times between 2019 and 2021:

  • Yantian to Europe up by 10 days (34%)
  • Shanghai to Europe up by 14 days (42%)
  • Quingdao to Europe up by 15 days (38%)
  • Ningbo to Europe up by 12 days (35%)

(Averages of major European ports of Rotterdam, Antwerp and Hamburg, were taken into account)

There are multiple and varying reasons for the increased lead times, but one thing is crystal-clear – their negative impact on just-in-time global supply chains. Hardly surprisingly, many manufacturers in Europe are looking to partly reverse the globalized outsourcing trend that has been such a characteristic feature of recent decades.

 

Coal shortage and power crunch in India

Not only China is facing a power crisis. In India coal supplies to thermal power plants are running critically low. Data from the Central Electricity Authority of India indicate that stocks at nearly 80% of the country’s coal-fired plants could run out in less than five days. As a result, states like Rajasthan, Jharkhand and Bihar have been experiencing power cuts of up to 14 hours. Maharashtra has shut down 13 power plants and urged the population to use power sparingly. The power shortages are naturally affecting output from India’s manufacturing sector. This year’s heavy monsoon rains have caused flooding in India and disrupted the dispatch of coal from the mines. Monsoon flooding is, of course, an annual phenomenon and usually, more coal is imported to bridge the gap. But due to worldwide coal and gas shortages, prices have risen significantly and simply importing coal has become much more of a financial challenge.

 

Data Insights

  • Power crunch in China impacting manufacturing output and global supply chains
  • Disruptions exacerbated by port closures in China – right now, Yantian Port due to Cyclone Kompasu
  • China to EU transit times are up 34-42% compared to pre-covid
  • India also facing electricity crisis with coal supplies critically low
  • 72 Inner Mongolian coal mines ordered to significantly boost coal production to avert even worse power shortages
  • Setback for global efforts to cut coal consumption as a means of combating climate change

 

 

 

Disclaimer: The data referenced in this release is sourced from project44’s freight visibility platform, based on the logistics indicators that the platform tracks. The sample data sets referenced do not include all freight movement data tracked by other entities. Data from project44’s platform reflects a statically significant sample size to draw conclusions.