On Tuesday, September 22, 2021, President Xi Jinping pledged that China, the world’s biggest polluter of greenhouse gases, will be carbon neutral by 2060.
The announcement and China’s new, aggressive stance on carbon emissions comes on the heels of power supply issues as rolling blackouts, that began earlier this year, are now threatening both manufacturing operations and daily life.
CHINA MANUFACTURING DELAYS
The Chinese government has instructed major industrial centers to use less fossil fuel per economic output or be forced to reduce production capacity due to power limitations. In some provinces, coal has become too expensive after China banned it from being imported from Australia last year, further aggravating tight energy supplies.
China’s conviction to curb carbon emissions and reduce energy consumption to be less dependent on fossil fuels is admirable, however, extreme power outages in key manufacturing provinces means global supply chains will have another battle to fight heading into peak holiday shipping season.
SEMICONDUCTOR DISRUPTION
The new energy policy will heavily impact industries that rely on Chinese semiconductor component manufacturing, such as automobiles and high-end electronics. Local government officials shut down or restricted production for factories in Guangdong and Jiangsu that exceeded set energy targets.
In Jiangsu, a province near Shanghai, almost a dozen Taiwan-based semiconductor-related companies filed announcements advising temporary closure of local facilities until the end of September. National power rationing is expected to continue through the end of October, if not longer.
INTERNATIONAL SHIPPING
Coupled with existing delays from COVID and extreme weather, cargo volume is expected to decline as manufacturing continues to be restricted. Delays in new production may offer an opportunity for backlogged inventories to finally be shipped from origin as carriers inject new vessels and charter capacity into the market.
Shippers are advised to contact their origin manufacturing and confirm order ready dates in order to prevent rolled bookings on ocean carrier services.
Kindly note, China’s National Golden Week Holiday begins Friday, October 1st and ends on Thursday, October 7th, 2021. Most overseas operations will be limited.
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