China's power crunch may add to US price rises
By Meng Jing, Zhong Nan and Zhang Yuwei / China Daily / June 9, 2011BEIJING - With a great economy, comes great power. When China, then the world's seventh-largest economy, had its worst blackouts seven years ago, other countries could hardly feel anything except a pinch of short-term undersupply caused by suspended production.
But this time, the second-largest economy has a robust development and closer trade ties with all the major players in the world. Now when China suffers - this year's blackout are supposed to be worse than 2004 - the rest of the world will feel its pain, especially its largest exporting destinations, the United States and the European Union.
... With the arrival of the last straw, the severe power shortage, which has led to a rise in electricity prices and is likely to push up prices of other commodities, it seems impossible for the world's second-largest economy to remain a cheap goods exporter.
... More than 10 provinces in China have been hit badly by the power shortages. Suffering regions include cities in West China, Central China and export hubs in coastal China.
Power cuts and blackouts in the Pearl River Delta and the Yangtze River Delta started in March, several months earlier than usual. The most difficult time is yet to come, when more and more energy-hungry air conditioners kick in with the rising temperature.
The State Grid, China's main electricity distribution company, warned last month that the electricity shortfall this summer may be as high as 40 gigawatts (gW), surpassing the 2004 record.
In Cixi city, East China's Zhejiang province, blackouts started in mid-March this year, compared to September of last year.
Power rationing happens two days every five days, usually lasting 12 hours, in the chemical fiber production hub in coastal China.
Manufactures are using diesel generators to fill the gaps between low power supply and surging power demand.
However, using diesel generators comes at a price. The price of power generated by diesel is nearly 2 yuan (3 cents) for each kilowatt-hour (kWh), which is twice as much as power from electric grid, said Xu Shuhui, deputy general manager of Cixi Henghui Chemical Fiber Co.
"We can barely make ends meet when the power price reaches 1.5 yuan per kWh, let alone 2 yuan," Xu said, suggesting the company might have to increase the prices of its products.
... China has shocked Asian energy markets by suspending diesel exports to ensure domestic supplies are adequate as demand for the fuel rises.
The decision in mid-May means a significant tightening of diesel supplies across Asia as China is a big exporter to Singapore and Vietnam.
The move was followed by the National Development and Reform Commission's announcement on June 1 that it encourages higher coal imports to ensure domestic supplies in the summer, peak power-consuming season.
Around 75 percent of power is generated by coal-fired plants in China. The country became a net importer of coal in 2007 and emerged as the world's second-largest coal importer after Japan in 2010, despite the fact that it is a major coal producer in the world.
The price of thermal coal at Qinhuangdao Port, a Chinese benchmark, reached 810 yuan a ton in May, 30 yuan higher than the previous month, according to China National Coal Association.
According to osc.org.cn, a major coal trading information and service website, thermal coal prices in the main harbors around the Bohai Sea have been increasing for 10 weeks since March. ...
