Covid abrupt change in China affects supply chains from solar to coal

(Bloomberg) – China’s reopening is disrupting energy markets as the abrupt shift from Covid Zero shuts down industry and upends the normal flow of goods.

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A dramatic increase in infections is having a short-term impact on the supply chain for solar companies, the China Silicon Industry Association said in a statement on Wednesday. Many makers of wafers used in solar panels have scaled back operations, with some producing only 60% to 70% capacity, he said.

The supply shock comes at the end of a record year for solar installations in China. To maintain production, some renewable energy companies such as Longi Green Energy Technology Co. are operating closed-loop in their factories to keep the virus at bay.

Coal markets are also affected by its rampant diffusion. Mysteel reports that production of coking coal used by the steel industry has halved in Shanxi’s main mining hub, with 10 mines suspending production and 31 others reducing it. The miners have put workers in closed loops, but the impact could last for about two more weeks until the outbreak subsides, Mysteel said.

But for thermal coal, the abandonment of tough virus controls has ameliorated supply slack, which could mean China escapes the shortages that typically plague the economy during peak winter demand.

The factory closures have led to a slight decrease in coal consumption at power plants, according to Fengkuang Coal Logistics, at a time of year when demand usually increases due to heating needs. The research firm said it expects benchmark prices in the Qinhuangdao port to fall to around 1,000 yuan ($143) a ton in the coming weeks, from around 1,300 yuan now.

Coastal provinces have enough fuel stored for 20 days of use, and demand could be further constrained as more small factories choose to take longer vacations this year, Zhang Yupeng, an analyst at the China Coal Transportation and Distribution Association, said Wednesday. . The association expects energy demand to recover strongly after the Lunar New Year holiday as more government stimulus arrives.

Diary of the week

(All Beijing times unless otherwise noted.)

Thursday 22nd December

Friday 23rd December

  • Weekly port inventories of iron ore in China

  • Shanghai Stock Exchange Commodities Weekly Inventory, ~3:30pm

On the wire

Chinese authorities have stepped up their calls to prioritize growth next year and help the real estate sector recover from its worst slump on record, with further signs that the economy will rank first in 2023.

Months after Shanghai underwent a brutal lockdown to stop the spread of Covid, the virus is starting to make its way virtually unchecked through the megacity’s 25 million population.

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