China's largest manufacturing hub Guangdong facing electricity shortages

Guangdong, China's main manufacturing hub, has been left in the throes of an electricity shortage following scarce rain and rising coal prices, casting uncertainty over 10% of its economic output

China's southern province of Guangdong, which is the country's main manufacturing hub, has been left in the throes of an electricity shortage following scarce rain, rising coal prices and rapid inland industrialisation, casting uncertainty over 10 per cent of the country's economic output.

According to Nikkei Asia, the effects are being felt on factory floors and in managers' offices, with one Japanese-owned metal parts supplier sent scrambling to rearrange work schedules after local authorities ordered power cuts.

The biggest question emerging is how long the electricity shortage will last. A Honda Motor spokesperson said there was no impact on production at this time. But if the power constraints become chronic, they would risk rattling global supply chains.

"With two power cuts a week, we can still ensure enough output. With two power cuts a week, we can still ensure enough output," said a Honda executive.

On Thursday, a spokesperson for the National Development and Reform Commission, China's economic planning body, acknowledged in a news conference that Guangdong and other southern provinces face power shortages.

During the mandated power cuts, companies can use only enough electricity for essential operations, such as security. Going over the limit results in a penalty in the form of extended hours of restrictions, according to Nikkei Asia.

Guangdong houses 8 per cent of China's population and some of the Chinese biggest companies, such as Huawei Technologies, electric-vehicle builder BYD, appliance group Midea and Tencent Holdings.

Meanwhile, authorities have attributed the electricity shortage to a drought and elevated summer demand. Guangdong received about only about 40 per cent as much precipitation from January to early April as in the same period last year, while the average temperature was 2.2 degrees Celsius higher, local media reported.

Low coal inventories -- an effect of rising prices -- are also taking a toll. Domestic coal prices stood at 878 yuan (USD 136) per ton in early June, up roughly 70 per cent on the year, based on 5,500 kilocalories of heat per kg, official data shows.

Nikkei Asia further reported that wider factors in the regional economy are also at work. About 30 per cent of the power used in Guangdong comes long-distance from Yunnan and other provinces.

One of its nuclear plants, in the Guangdong city of Taishan, appeared at risk of releasing radioactive materials into the environment, CNN reported last week. However, Chinese authorities have provided few details on the situation while admitting that there had been fuel rod damage at the plant.

Guangdong is also witnessing a surge in COVID-19 cases, resulting in hundreds of flights being cancelled and lockdown imposed in some cities.

Guangdong's health commission reported a total of six new COVID-19 cases on Saturday, including two from Shenzhen and one each in Foshan and Dongguan, South China Morning Post reported.