China-Originated 'Energy Crisis' to Hit Korea... "This Winter, the Whole World Will Experience Severe Cold"

Energy Prices Surge Across Europe and Asia... Concerns Over Global Supply Chain Disruptions
Bloomberg "Korea Faces Potential Supply Chain Impact Due to Power Shortages in China"

A view of the Wujing coal-fired power plant in Shanghai, China, on the 28th of last month. The photo is unrelated to specific expressions in the article. [Image source=Yonhap News]

[Asia Economy Reporter Park Hyun-joo] The soaring energy prices are causing global distress. As the winter season approaches, when fuel consumption surges, countries around the world are facing deep concerns.

According to the New York Times (NYT) on the 5th (local time), British economic critic Bill Blaine, who publishes a financial newsletter, stated, "This winter, the world will experience severe cold," adding, "As energy prices rise, the costs will be borne by the vulnerable. The UK will kneel and beg wherever energy is available, and Europe will face similar hardships."

This prediction has already become a reality. China's severe power shortage has affected the global semiconductor and electronics industries, and the European Union (EU) has entered the energy scramble.

◆ Europe on 'Emergency' Due to Energy Crisis... Struggling to Find Solutions

Recently, natural gas prices have surged worldwide. According to energy information provider Kpler, global liquefied natural gas (LNG) demand increased by 5.3% year-on-year through September this year, while natural gas supply has been disrupted due to production facility expansions and the impact of hurricanes.

Meanwhile, Europe's fuel reserves are at unprecedentedly low levels. According to a Bloomberg report on the 27th of last month, natural gas pipeline transport from Russia and Norway remains limited. Consequently, on the 30th of last month, European natural gas prices skyrocketed 400% compared to the beginning of the year, reaching 97.73 euros (approximately 134,600 KRW) per megawatt-hour (MWh). Europe, including the UK, heavily depends on Russian natural gas as a primary fuel for power generation.

Coal prices have also surged sharply. Australian thermal coal prices jumped from around $100 (119,100 KRW) per ton at the beginning of this year to about $400 (476,400 KRW) currently.

This has led to a scramble over energy supply. Last month, an LNG carrier leased by Royal Dutch Shell abruptly changed course from heading to Asia to Rotterdam, Netherlands. Another LNG carrier, the 'Gaslog Salem,' also suddenly altered its route from the Gulf of Mexico to the Mediterranean last week while en route to Asia.

Kpler reported, citing industry insiders, that "shipping companies are sometimes changing or canceling natural gas transport priorities, risking compensation to existing customers, in pursuit of higher profits."

European countries are struggling to devise countermeasures. EU member states are pressuring the EU to "come up with energy procurement measures." On the 5th, Bloomberg reported that finance ministers from five countries?France, Spain, Greece, the Czech Republic, and Romania?jointly issued a statement to this effect. Bloomberg analyzed, "This comes amid European governments' anxiety that soaring gas prices could worsen inflation and cause 'energy poverty' among low-income groups."

EU Energy Commissioner Kadri Simson stated on the 7th, "The EU does not have the authority to provide short-term solutions," but added, "We can consider supporting countries that set goals such as reducing energy taxes."

On the 29th of last month, a truck was transporting coal at a thermal power plant in Shenyang, Liaoning Province, China. The photo is unrelated to specific expressions in the article. [Image source=Yonhap News]

◆ 'China-Origin Energy Crisis' Impacts Apple and Tesla... "South Korea Is No Exception"

Asia is no exception. According to Reuters on the 6th, the Japan-Korea Marker (JKM), an LNG price indicator for Northeast Asia, surged 42.0% in one day to $56.326 per million BTU for November shipments.

Experts warn that the butterfly effect of China's energy crisis could spread worldwide. On the 8th, Bloomberg reported, "China's energy crisis is hitting everything from iPhones to milk," noting, "The shock from China's energy shortage could affect everyone?from Toyota cars, Australian sheep farms, to corrugated cardboard box manufacturers."

In particular, South Korea, which has a high trade dependence on China, is expected to be vulnerable to supply chain disruptions caused by China's power shortage. Bloomberg noted, "Neighbors like Taiwan and South Korea, which trade heavily with China, are sensitive," adding, "Metal-exporting countries like Australia and Chile, as well as key trading partners like Germany, may also face risks from China's economic slowdown."

In fact, the damage caused by the power shortage in China is widespread.

PEGATRON, an iPhone assembly company located in Jiangsu Province, China, has reduced its total electricity usage by more than 10%. This raises concerns that production delays for Apple's recently released iPhone 13 may be prolonged.

The semiconductor and electronics supply chains have also been hit. The ripple effects could extend beyond American electronics and automotive companies such as Apple, Tesla, Microsoft, HP, and Dell to semiconductor companies like Qualcomm and Intel.

ASE, the world's largest semiconductor backend service provider, suspended operations at its Kunshan plant in Jiangsu Province for four days from the 27th to the 30th of last month. ASE handles packaging and testing processes for semiconductors received from companies like Qualcomm, Apple, and Nvidia. If bottlenecks at this facility are not resolved, semiconductor product supply chains could be disrupted.

Chinese economic media Caijing cited a semiconductor industry insider saying, "The recent power supply restrictions have had a significant impact on China's semiconductor supply chain, especially affecting companies in Jiangsu and Guangdong provinces. If the supply of products like substrates, electronic materials, and light-emitting diodes (LEDs) is interrupted, it will have a massive impact on the entire supply chain."

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