Power Cuts Disrupt Production in China
The world is a more volatile place. No sooner has the manufacturing industry adjusted to the impact of one disruption than it is faced with another one.
The latest calamity to hit our industry are the power cuts in multiple cities across China. Various reasons have been given for this rationing including: a rapid post-pandemic recovery leading to booming exports and so excess demand for electricity; a shortage of coal coupled with a desire to limit imports and; a drive to decarbonize energy production combined with unstable renewable energy supplies.
At Porticos Asia we were first aware of this problem a few weeks ago. Several of our suppliers in Guangdong province, China notified us at very short notice that deliveries would be potentially impacted by power rationing measures. To be fair, our suppliers in turn were given very little advanced notice.
Because of this reduction in power supply factories have been forced to operate on a part-time basis. Partners have told us they have been forced to cut all but the minimum of power consumption. Some have even been working without lighting and air-conditioning.
To make matters worse the situation is highly unstable. Factories are being told on a week-by-week basis what disruptions to expect. One of our partners was advised on Monday that they would only have power for one day that week. To offset this impact many facilities can generate their own power using an in-house generator. A generator can typically supply enough electricity for lighting and light equipment to allow final product assembly. But it cannot support the use of heavy equipment such as injection molding equipment.
In such circumstances it is vital to be transparent with customers. We have been informing them immediately about possible delays and keeping them updated on the latest developments. Apart from this, in the short term, not much can be done. However, luckily, our partners have so far been able to minimise adverse impact by working overtime once electricity supply has been restored and before the next cut is announced. Also, assembly at our own facility in Hong Kong has not been affected as Hong Kong has been spared mandatory power-rationing.