If one may remember, very recently, China has been dealing with one of the worst electricity crises it faced in decades even as reports suggest more than half of China’s provinces have had to resort to rationing electricity to address the situation.
It may be mentioned here that at least 20 Chinese provinces and regions make up more than 66 per cent of the country’s gross domestic product, which announced some form of power cuts, mostly targeted at heavy industrial users even as reports suggest the immediate cause of the same has been China’s dependence on coal still, which provides around 70 per cent of the country’s power generation. And as may be expected, record high coal prices caused power generators to trim output despite soaring demand, while some areas have pro-actively halted electricity flows to meet emissions and energy intensity goals as well even if some reports underlined the crisis can also be traced back to a string of policy missteps and poorly thought-out market interventions after the beginning of the pandemic.
Meanwhile, a news article in Forbes maintained flooding across China’s key coal producing provinces, resurgent demand for Chinese goods in the wake of pandemic easing, conflicting CCP energy policies, and extreme market distortions, including power rationing and price controls, all contributed to energy shortage while adding some provinces in China have gone as far as ordering factories to halt all production for a few days each week and factory owners increasingly turning to diesel generators to keep their business running amidst the energy crunch, as chaos escalated.
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Industry makes up 59 per cent of total grid demand in China — more than all homes, offices and retail stores put together even as heavy industry accounts for the lion’s share of China’s domestic energy demand, claimed the report adding the world has become accustomed to cheap Chinese power for making a range of its goods and we all could be feeling the effect of the crisis if it is not tackled soon.
This has particularly come true for the Bangladesh garment industry, which is overly dependent on China for its raw material requirements, so it seems!
It may be mentioned here that soon after the power crisis hit China, it was expected prices of textiles and garments made in China would likely rise by 30 to 40 per cent on account of the planned shutdowns in industrial provinces of Guangdong, Jiangsu and Zhejiang even if China is a major supplier of several products, including textiles and apparel, to countries across the world while being also a major source of raw materials for a host of manufacturing destinations across the globe including the Bangladesh garment industry too.
The impact of such power crisis soon became visible as many fabric manufacturers scaled down production even as reports claimed Yiwu Huading Nylon Co. Ltd., a maker of synthetic fabric nylon in Zhejiang, suspended half of its production capacity then in response to the local Government’s order to cut electricity consumption even as the company expected output to resume soon with supply chain disruption looming large.
It was not long before its impact started showing with industries like Bangladesh’s apparel sector, facing the brunt of the same even as it may be mentioned here that earlier when the Coronavirus pandemic first broke out in China, Bangladesh have had to deal with fallouts of the supply chain disruption as well as production and economic activities in China took a beating on account of the pandemic, the ripple effect of which was felt by the Bangladesh garment industry rather strongly then as well.
China being the main source of raw materials for export-oriented local garment, textile and garment accessories sector in Bangladesh along with pharmaceutical and plastic goods, it was but obvious that the power crisis in the world’s second-largest economy will soon hit Bangladesh, which imports around US $ 18 billion worth of goods, mainly industrial raw material from China, the country’s largest trading partner even as 95 per cent of the man-made fibre yarn is imported from China currently.
“I don’t know when I will be able to supply fabrics to our clients as our factory in China is not running in full swing because of the power cuts,” reportedly claimed Rassel Khandokar, Country Marketing Representative of Bonher Textile, a Chinese textile supplier, speaking to the media earlier, adding, “If we make any delay in supplying fabrics, the shipments from Bangladesh will also be delayed. So, a backlog will be created, and the local suppliers will face suspension or cancellation of orders and discounts.”
Rassel has reportedly supplied around two million yards of fabrics in 2019 to garment factories while in 2020, his business was severely affected due to the COVID-19 pandemic even as in 2021, he has sold around 1.1 million yards of fabrics so far before the electricity crisis in China hit his business and at a time when fabric demand in Bangladesh is increasing by the day at the back of increasing number of work orders from the global buyers.
Meanwhile, speaking to the media, President of the Bangladesh Textile Mills Association (BTMA) Mohammad Ali Khokon said Bangladesh would face a big loss due to the Chinese power crisis as many factories were dependent on the country.
“We may supply yarn for knitwear items but it is difficult to supply the raw materials for woven items,” underlined the BTMA President even as BGMEA President Faruque Hassan said the Chinese power cut was a challenge for the local industry while adding that a lot of work orders was shifting to Bangladesh from China.
“The relocation of the orders has created an opportunity for us, but the supply chain disruption will definitely affect our business, especially the recovery of our garment export,” reportedly maintained the BGMEA President even as latest reports suggest prices of raw materials imported by the Bangladesh garment industry from China has increased significantly of late even as Chinese dyes and chemicals now cost around US $ 22/ kg, from what was only US $ 13/kg even as liquid indigo now costs US $ 8.20/ kg, which was US $ 4.80/kg some time back even as Fazlee Shamim Ehsan, Chief Executive officer at Fatullah Apparels Limited, while speaking to the media stated that not only raw material prices have doubled over a month even shipments that would take a week now take more than a month even as he suggested India could be an alternative sourcing country for some items.
…but Indian exporters charge US $ 2-US $ 3 higher than China’s and they are now charging more capitalising on the ongoing crisis, reportedly claimed Fazlee Shamim Ehsan.
On the positive side though, as per latest news, the world’s No 2 economy is slowly recovering from its most severe energy crunch in decades even as China’s efforts to secure energy supply have ‘achieved initial results’, but coal production must be ramped up to ensure power capacity ahead of the frigid winter months, as per the nation’s Vice-Premier Han Zheng, who reportedly added that efforts to secure power supply have achieved initial results, coal production capacity has been released and prices are gradually back to normal even if analysts warn unseasonably cold weather could cause further coal shortages, with knock-on effects felt throughout the supply chain.
And if that happens, it won’t augur well for Bangladesh, one must maintain!