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China energy crisis: a headline waiting to happen?

Bulldog Licensing’s Rob Corney on the brewing energy crisis which could affect manufactured goods across the world.

Another week and another mini-crisis as we rush to the petrol stations to fill up our cars, while the army is called in to deliver more fuel that we shouldn’t actually need.

But while the British media is busily conjuring up a fuel shortage out of nowhere or focusing on the lack of HGV drivers in the world, there is little talk of a real energy crisis with global significance: the one in China that is a threat to the world’s most important manufacturing centre.

The shipping crisis has been widely reported with container prices spiralling and space on a ship rarer than a balanced judgement in a social media debate.

But the Chinese energy crisis (and its potential impact on manufacturing) has travelled under the radar, hidden by the smokescreen of everything else in the world seemingly on fire right now. The global increase in energy prices may be causing grave concern for consumers close to home, but it is China’s energy problems which may more directly impact the availability of products on retailers’ shelves in the medium term.

A perfect storm of worker shortages, an apparent desire to introduce new environmental controls and a scarcity of coal to fuel power stations has led to shutdowns across the electricity grid and power outages in two thirds of the country’s provinces.

China is the world’s second largest coal importer and prices of this commodity, along with every other form of energy, have soared since post-lockdown re-opening, leading to a running down of coal reserves by power companies hedging their bets that prices may fall back some time.

But the Chinese government has further hamstrung energy companies with an unofficial ban on imports of coal from Australia, the world’s second largest exporter, in a sulk over the Australian government’s demands for an investigation into the origins of Covid-19. With nearly 60% of the country’s energy infrastructure reliant on coal, a depleted stock and reduced supply is clearly an issue.

Many factories are having to work short weeks as the power is switched off and while the current problems are centred around how to get manufactured goods out of China, the forthcoming issues may be about getting them made in the first place.

As the world rushes headlong to fix the Covid-induced crises impacting shipping and haulage – and the UK grapples with its self-serving media creating chaos at the petrol pumps – we should all be simultaneously hoping that the Chinese energy crisis is not a headline waiting to happen.

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