Drought & Power Shortages affect Supply Chain

6. september

A severe drought and sweltering heat have led to low water levels and a drop in hydroelectric power generation in China in recent weeks, causing power shortages and forcing the government to ration electricity in some provinces.  

Authorities have resorted to energy-saving measures such as switching off decorative lights and cutting back on the opening hours of shopping malls. They are also boosting coal power generation and transfer electricity from other regions.

The government has made providing power to households and public facilities a priority, but many factories have experienced power cuts and had to shut down production. Toyota and other auto parts factories are in this area. Even Apple & Tesla have suffered power cuts.

In Chengdu, 90% of factories in Sichuan province have completely shut down even the large firms have been affected this time. 80% of businesses in places such as Chengdu and Chongqing were completely shut down for at least two weeks — regardless of industry or size.

All companies have been affected whether small & local companies, big state-owned companies, or foreign firms.

Prior to the power shortage, supply chains have already been strained by the impact of the coronavirus pandemic, China's strict lockdowns and Russia's invasion of Ukraine.

Supplies of everything from metals such as aluminum to automotive parts, as well as food commodities have been hampered.

A growing backlog of European imports is expected to spill over into the first quarter of 2023.

There will be additional expected cancelled sailings around the holiday which limits vessel capacity.

Carriers, however, have not yet incorporated planned blanked sailings in connection with up-coming Golden Week ex China, so it is expected that the number of blanked sailings on trades ex Asia will increase in weeks 40-42.

Do you have any further questions?

You are always welcome to contact your personal LEMAN representative to learn more about the situation.