Heat wave threatens power shortages and higher pork prices in China

• Zhejiang Province has advised its 65 million citizens and enterprises to save energy.
• The province’s energy bureau has rationed the supply of power for energy-intensive businesses.
• China’s pig farming sector is feeling the effects both domestic and international markets.

In China, a major manufacturing zone has been compelled to appeal to firms and individuals to use less energy, while the risk of crop failure is driving up the price of pork.

At a time when the economy is still attempting to recover from painful Covid-related lockdowns, dozens of cities have been experiencing record-high temperatures. The heatwave also occurs at a time when consumer inflation, primarily due to increased food costs, reaches a 23-month high.

According to the National Meteorological Administration, 84 localities throughout the nation on Wednesday issued their strongest red alert warnings, indicating that temperatures are predicted to exceed 40 degrees Celsius (104 degrees Fahrenheit) in the next 24 hours. On Sunday, Shanghai recorded temperatures of 40 degrees Celsius for the first time this year.

Due to people turning up their air conditioning, China’s heat wave has increased electricity demand to extraordinary levels in several areas.

Zhejiang Province, a significant export and manufacturing hub on China’s east coast, advised its 65 million citizens and enterprises to save energy on Tuesday.

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The province’s energy bureau and State Grid issued a joint statement reading, “To secure electricity supply for households and businesses…we ask for the combined activities by the entire society to save electricity.”

According to experts from various Chinese brokerage firms, Zhejiang’s energy bureau has also rationed the supply of power for several energy-intensive businesses, such as polyester makers and textile printing and dying businesses in the cities of Hangzhou, Shaoxing, and Haining.

Only a few months have passed since China’s energy crisis, which resulted in severe power disruptions in the second part of last year, was resolved. Blackouts were attributed to coal shortages and a rise in power demand. About 60% of China’s electricity is produced using coal.

For China’s enormous manufacturing sector, which is still recovering from months of severe Covid lockdowns, the current heatwave and the ensuing electricity rationing provide yet another obstacle.

On Friday, China will release its second quarter GDP figures, which are likely to show growth slowing to around 1% from 4.8 % in the first three months of the year.

Fears about inflation

Additionally, China’s crop production is suffering from the high temperatures, which could increase food inflation.

In many northern provinces, including Ningxia, Inner Mongolia, and Hebei, high temperatures could have a negative influence on the output of corn, soybeans, wheat, and pastures, the Central Meteorological Observatory has warned.

In recent weeks, the feed sector and pig farming have begun to feel the effects of rising food costs on both domestic and international markets.

A number of significant feed companies, including New Hope Group, alerted customers earlier this month that they will raise the cost of pig, poultry, and fish feeds due to increased prices for soybean meal, corn, and wheat. The majority of the price increases began last week.

Due to the fact that soybean and corn are the two main components utilised in the pig business, pork, China’s staple meat, has been particularly heavily hit.

According to the most recent information from the National Development and Reform Commission, the chief economic planner of the nation, hog prices had grown by 46 percent by the week ending July 1 since March.

The commission announced last week that it was thinking about using the nation’s strategic pork reserves to slow the sharp price rise. Additionally, it promised to crack down on any price gouging by pig farms.

The consumer price index rose 2.5 percent from a year earlier, up from 2.1 percent in May, and reached its highest level in almost two years, according to China’s most current CPI statistics. According to a statement from the national office of statistics, the price increase of pork, which increased by about 3% in June compared to May, had increased the upward pressure.

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