"Please Supply at Least 50% Electricity" Korean Companies Anxious Amid Unprecedented Power Shortage in China

POSCO Factory Also Repeatedly Shut Down and Restarted... Reluctant to Complain for Fear of Falling Out of Favor with Authorities
Partial Blackouts in Areas Like Shenyang Cut Off Household Electricity

A thermal power plant in Shenyang, Liaoning Province, China, on the 29th of last month. [Image source=Yonhap News]

[Asia Economy Reporter Park Hyun-joo] The recent surge in energy prices has triggered a power shortage in China, causing significant difficulties for Korean companies operating locally.

Since October 8, following the end of China's National Day holiday earlier this month, power supply restrictions have continued in regions with a high concentration of Korean businesses such as Zhejiang Province, Jiangsu Province, and Guangdong Province. In particular, the power supply has been limited fluidly without prior notice, severely disrupting the stable operation of production facilities.

According to a report by Yonhap News on the 14th, the POSCO stainless steel plant located in Zhangjiagang, Jiangsu Province, has not yet resumed normal operations after halting production at the end of last month at the authorities' request. Although operations briefly resumed from the 1st to the 4th, the plant has been maintaining about an 80% operating rate by repeatedly turning the electric furnace used to produce stainless steel on and off as power supply restrictions resumed.

Meanwhile, Korean companies are reportedly hesitant to publicly appeal for relief, fearing backlash from local governments.

A representative of a Korean company in China told Yonhap News, "We hoped conditions would improve starting in October, the beginning of the fourth quarter, but there has been no significant change. Many Korean companies are visiting development zones or city governments, pleading, 'Please supply at least 50% of the electricity,' and operating under such circumstances," they explained.

A man is having breakfast relying on the light from his mobile phone after a power outage occurred on the 29th of last month at a restaurant in Shenyang, Liaoning Province, in northeastern China, which is experiencing a severe power shortage. [Image source=Yonhap News]

The bigger issue is that power supply restrictions in China are likely to continue until the end of this year.

Local governments abruptly began limiting industrial power supply from mid-September. Some speculate within China that this is not only due to coal supply issues but also a 'catch-up homework' measure ahead of the central government's review of third-quarter energy consumption performance. There is an expectation that conditions might rapidly improve starting in October, the beginning of the fourth quarter.

However, despite strong pressure from the central government to normalize power supply, there are no clear signs of power restrictions easing in many regions.

Zhejiang Province, an economically developed area on China's eastern coast, raised its power shortage management level from grade B to grade C starting October 8. After the National Day holiday, some areas in Zhejiang reportedly instructed local companies to halt operations three to four days per week.

Meanwhile, in some parts of the three northeastern provinces, including Shenyang, widespread blackouts have occurred, cutting off not only industrial but also some residential power without prior notice, causing significant public unrest. The Chinese central government has pledged to ensure uninterrupted power supply for 'livelihood use' and is working to calm public sentiment.

Regarding the power shortage, Chinese authorities explained that while power supply has not decreased absolutely, it has failed to keep pace with increased demand.

On the 13th, Li Ming, head of the Market Operations Department at the State Grid Corporation of China, held a press conference stating, "From January to September this year, community power supply reached 480 billion kWh, a 13% increase compared to the same period last year. With the arrival of winter, power demand has further increased, and the instantaneous peak load may exceed record levels, placing a relatively heavy burden on power supply," he said.