China Imposes Power Usage Restrictions... Emergency for Local Korean Companies (Comprehensive)

Instructions to Reduce Electricity Usage by up to 50% in 9 Provinces Including Jiangsu, Guangdong, Shandong, Sichuan
Seemingly a Preemptive Measure Against Winter Power Shortages Due to Coal Shortages

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Some provincial governments in China have instructed high energy-consuming companies to reduce their electricity usage by up to 50% as part of carbon neutrality policies, leading to reports that some companies have halted their production lines.

The provinces that issued such measures include Guangdong, Shandong, Jiangsu, Qinghai, Sichuan, Chongqing, Henan, Yunnan, and Ningxia Autonomous Region, totaling nine provinces. These measures apply not only to Chinese companies but also to Korean companies (foreign enterprises) operating locally in China.

(Photo by AP Yonhap News)

According to sources in Beijing on the 27th, the POSCO Stainless Steel plant located in Jiangsu Province has stopped operations since the 17th. This plant produces 1 million tons of stainless steel annually using an electric furnace. Stainless steel is mainly used to manufacture pipes and is also used in some automobile parts. Operating the electric furnace requires an enormous amount of electricity.

A POSCO official explained, "We received instructions from the Jiangsu provincial government to reduce electricity usage in September," adding, "The upstream processes such as hot rolling have stopped, while downstream processes like cold rolling are currently operating." The official also mentioned that upstream processes are expected to resume after the National Day holiday in October.

An official from Company A stated, "Recently, the National Development and Reform Commission (NDRC) of China released a proposal to supplement the total energy consumption system," and added, "The current reduction in electricity usage for high energy-consuming companies appears to be part of that effort." The official further noted that the central Chinese government has introduced a system that ranks provinces based on energy consumption indicators.

Although the reduction in electricity usage by high energy-consuming companies is superficially interpreted as part of carbon neutrality efforts, it seems to reflect the Chinese government's complex difficulties.

First, it can be seen as a preemptive measure to address potential power shortages. Since last year, China has had diplomatic conflicts with Australia over the origin of COVID-19, effectively banning imports of Australian coal. Due to the ban on Australian coal imports, some local provinces such as Zhejiang, Jiangxi, and Hunan experienced power shortages at the end of last year. If coal shortages occur ahead of winter, the Chinese leadership could face serious setbacks.

It can also be interpreted as a desperate measure by the Chinese government to curb the rise in the Producer Price Index (PPI). Last month, China's PPI rose 9.5% year-on-year, marking the highest level in 13 years. The PPI increases were particularly high in coal mining (57.1%), oil and natural gas extraction (41.3%), petroleum and coal processing (35.3%), ferrous metal mining (46.1%), and chemical fiber manufacturing (24.0%). Since international raw material price increases cannot be immediately reflected in product prices, the profitability of Chinese manufacturing companies is deteriorating.

Additionally, some provinces may have hastened to reduce electricity usage to shed the stigma of being high energy-consuming cities.

An official from Company B said, "In Guangdong Province, policies such as operating factories for two days and shutting down for five days are in place, showing differences by province and city," and added, "Instructions to reduce electricity usage by 30 to 50% have been communicated regionally."

A Company C official explained, "Nine provinces in China are strongly enforcing energy usage restrictions, and although other provinces and cities have more limited measures, some electricity usage restrictions are also being implemented," adding, "Energy restriction measures are effectively being carried out nationwide in China."

The nine provinces where electricity usage reduction orders have been issued host local factories of major Korean companies such as Samsung Display, LG Chem, Kia Motors, POSCO, and Doosan.

This content was produced with the assistance of AI translation services.