- Maersk, the world’s largest containerline, has warned clients of the supply chain risks from China’s ongoing power shortages.
- The higher energy prices are something Maersk has warned could get worse for manufacturers in the coming months.
A recent news article published in the Maersk states that Maersk warns clients of the supply chain risks emanating from China’s electricity rationing measures.
Electricity rationing measures
Electricity rationing measures have limited many factories to fewer days of production.
As China enters the winter season, where the general need for electricity increases, it is expected that the coal and power supply crunch will continue, Maersk pointed out.
Measures enacted in key areas in China
Key manufacturing areas in China such as Guangdong, Jiangsu and Zhejiang, are subject to electricity rationing measures. As of today, 20 out of 31 provinces in China are subject to restrictions to various degrees. The electricity shortages are caused by a combination of factors, hereunder high coal prices, unpredictable weather patterns and challenges of meeting energy and emissions goals.
How these measures may impact your business
Increased cost: Coal prices have more than doubled in the last year, causing electricity costs to surge. According to the National Reform and Development Commission, power prices may rise to 20% higher than current levels or to pre-approved benchmark prices set by the government. Additionally, new reforms may entail that industrial and commercial users will have to purchase electricity at market prices, rather than through the current power purchasing scheme that has kept costs artificially low for large consumers. This may result in increase of cost of production.
Volume of production: Rationing measures have limited many factories to fewer days of production. As China enters the winter season, where the general need for electricity increases, it is expected that the coal and power supply crunch will continue. The level of disruption to manufacturing will in part depend on the severity of the winter and the corresponding need for electricity for heating purposes.
Delay in delivery: Whilst consumer needs are expected to be high during the end-of-year holiday shopping season, supply lines are impacted by rising raw material costs, port delays and shortage of shipping containers. This may have an adverse effect on supply chains and delivery.
What is Maersk and its partners doing to help you through this?
Maersk is keeping itself abreast of the situation as it continues to unfold and is in close contact with officials, local and regional vendors, customers and partners so we can assess and communicate on current and potential impacts on supply chains.
Whilst experts estimate that electricity shortages may ease over the coming months, we at Maersk understand that a delay can cause disruptions far down the line. As such, we are preparing for different scenarios, and are readying alternative solutions to ensure that disruptions are kept at a minimal. We are, as always, ready to assist our customers in revisiting upstream planning and prioritization of urgent orders, as well as alternative sourcing and transportation options. We will work closely with all parties to ensure the smoothest path for you, given present constraints.
What can I do?
Situations like this are never optimal. However, there are actions you can take to mitigate some of the more adverse elements:
- Monitor the supply situation so you can adjust your manufacturing plan and logistics where needed.
- Stay in contact with vendors, who will be able to monitor the local electricity distribution plan and assist in ensuring early detection, so disruptions to supply lines can be communicated in a timely manner.
- Reach out to Maersk at any time to discuss mitigating actions where and when needed, so we can assist in helping you reduce delays on cargo delivery.
We care about your business and want to assist and support you in managing your supply chain. We believe that by helping you hone your tools and by providing you with the necessary information, we can together strengthen your supply chain. We are continuing to follow the situation closely and endeavor to share our insights with you. If you have any questions, please reach out to your local Maersk professional for more information.
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Source: Maersk
