Some Apple, Tesla suppliers suspend production in China amid power pinch

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(Reuters) -Several Apple Inc and Tesla Inc suppliers have suspended production at some Chinese factories for a number of days to comply with tighter energy consumption policies, putting supply chains at risk in the peak season for electronics goods.

Two major Taiwanese chipmakers, however, said their China facilities are operating as normal.

The development comes as tight coal supplies in China and toughening emissions standards have triggered a contraction in heavy industry in several regions, dragging on the country's economic growth rate, analysts have said.

Apple supplier Unimicron Technology Corp late on Sunday said three of its China subsidiaries stopped production from midday on Sept. 26 until midnight on Sept. 30 to "comply with the local governments' electricity limiting policy".

The Taiwanese maker of printed circuit boards said it did not expect significant impact as other plants would make up production.

Eson Precision Ind Co Ltd, an affiliate of Taiwan's Hon Hai Precision Industry Co Ltd (Foxconn), in a statement said it suspended production from Sunday until Friday at facilities in the Chinese city of Kunshan.

Concraft Holding Co Ltd, a supplier of speaker components for Apple's iPhone and which owns manufacturing plants in Suzhou city, said it would suspend production for five days until noon on Thursday and use inventory to meet demand.

Chipmakers United Microelectronics Corp (UMC) and Taiwan Semiconductor Manufacturing Co Ltd told Reuters there was no impact at their China plants.

"UMC's Hejian fab in Suzhou is currently running at full capacity utilization of 80,000 plus wafers per month," said the Taiwanese firm, whose clients include Qualcomm Inc.

Two people familiar with the matter told Reuters that facilities in Kunshan of contract manufacturer Foxconn have seen a "very small" impact on production.

Foxconn had to "adjust" a small part of its capacity there, which includes the manufacture of non-Apple notebook computers, one of the people said, adding that the company has not seen any impact at other major production hubs across China.

The second person said the company had to move some of the Kunshan workers' shifts in late September to early October.

Foxconn, a major Apple supplier, declined to comment.

https://finance.yahoo.com/news/many-apple-tesla-suppliers-halt-054819143.html


China power crunch spreads, shutting factories and dimming growth outlook
By Shivani Singh and Min Zhang

BEIJING, Sept 27 (Reuters) - Widening power shortages in China have halted production at numerous factories including many supplying Apple and Tesla, while some shops in the northeast operated by candlelight and malls shut earlier as the economic toll of the squeeze mounted.

Rationing has been implemented during peak hours in many parts of northeastern China since last week, and residents of cities including Changchun said cuts were occurring sooner and lasting for longer, state media reported.

On Monday, State Grid Corp pledged to ensure basic power supply and avoid electricity cuts. read more

China's power crunch, caused by tight coal supplies and toughening emissions standards, has hurt production in industries across several regions and is dragging on the country's economic growth outlook, analysts said.

The impact on homes and non-industrial users comes as night-time temperatures slip to near-freezing in China's northernmost cities. The National Energy Administration (NEA) has told coal and natural gas firms to ensure sufficient energy supplies to keep homes warm during winter. read more

Liaoning province said power generation had declined significantly since July, and the supply gap widened to a "severe level" last week. It expanded power cuts from industrial firms to residential areas last week.

The city of Huludao told residents not to use high energy-consuming electronics like water heaters and microwave ovens during peak periods, and a resident of Harbin city in Heilongjiang province told Reuters that many shopping malls were closing earlier than usual at 4 p.m. (0800 GMT).

The power squeeze is unnerving Chinese stock markets at a time when the world's second-largest economy is already showing signs of slowing.

The Chinese economy is grappling with curbs on the property and tech sectors and concerns around the future of cash-strapped real estate giant China Evergrande

PRODUCTION FALLOUT

Tight coal supplies and toughening emission standards have driven the power shortages across China.

China has vowed to cut energy intensity by around 3% in 2021 to meet its climate goals. Provincial authorities have also stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year.

The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple (AAPL.O) and Tesla (TSLA.O) halted production at some plants. read more

At least 15 Chinese companies have said in exchange filings that production had been disrupted by power curbs, while more than 30 Taiwan-listed firms with China operations had stopped work to comply with the power limits.

The steel, aluminium and cement industries have also been hard hit by the output curbs, with about 7% of aluminium production capacity suspended and 29% of national cement production affected, Morgan Stanley analysts wrote in a Monday note. They said paper and glass could be the next industries to face supply disruptions.

Producers of chemicals, dyes, furniture and soymeal have also been affected.


JLC4EYONKJLRRCDM2JU2GN7BPM.png

China's seasonal output of key industrial products
GDP CUTS

The fallout of the power shortage has prompted some analysts to downgrade their 2021 growth outlook.

Nomura cut its third and fourth-quarter GDP growth forecasts to 4.7% and 3.0%, respectively, from 5.1% and 4.4% previously, and its full-year forecast to 7.7% from 8.2%. read more


"The power-supply shock in the world's second-biggest economy and biggest manufacturer will ripple through and impact global markets," analysts at Nomura said in a Sept. 24 note, warning that global supplies of textiles, toys and machine parts could be affected.

Morgan Stanley analysts said production cuts, if prolonged, could knock 1 percentage point off GDP growth in the fourth quarter.

3KGHX6UTGZPK3I2TPBVP7HEMUQ.png

China thermal coal prices
Last week, major coal producers in China met to try and resolve shortages and curb price increases. read more


China, the world's biggest energy consumer and source of climate-warming greenhouse gas, has said it aims to bring carbon emissions to a peak by 2030 and to net zero by 2060.

Reporting by Shivani Singh, Min Zhang in Beijing, Additional reporting by Kanishka Singh in Bengaluru, Ben Blanchard in Taipei, Yiming Shen in Shanghai and Beijing newsroom; Editing by Ana Nicolaci da Costa and Tony Munroe


https://www.reuters.com/world/china/chinas-power-crunch-begins-weigh-economic-outlook-2021-09-27/



Nomura cuts China GDP forecast as power crunch drags down growth
PUBLISHED MON, SEP 27 20212:59 AM EDT

KEY POINTS
  • “Markets now are so perplexed by the fallout of the property sector that they may ignore Beijing’s unprecedented curbs on energy consumption and energy intensity,” Nomura’s Chief China Economist Ting Lu said Friday.
  • As a result, he expects China’s GDP to grow by 7.7% this year, down from 8.2% previously forecast.
  • Most economists haven’t cut their 2021 China GDP forecasts yet, but are watching a rising number of drags on growth.
28-1632701320216-gettyimages-1235264568-AFP_9MV6WK.jpg

Workers produce adhesive tapes for flexible printed circuits (FPC) at a factory in Yancheng in China’s eastern Jiangsu province on September 15, 2021.
STR | AFP | Getty Images

BEIJING — Nomura’s Chief China Economist Ting Lu cut his forecast for Chinese GDP growth this year as factories shut down to comply with carbon emissions reduction targets.

“Markets now are so perplexed by the fallout of the property sector that they may ignore Beijing’s unprecedented curbs on energy consumption and energy intensity,” Lu said in a note Friday.

As a result, he expects China’s GDP to grow by 7.7% this year, down from 8.2% previously forecast.



Chinese President Xi Jinping announced in September 2020 that China would reach peak carbon emissions by 2030 and become carbon neutral by 2060. That’s kicked off national and local plans to reduce production of coal and other carbon-heavy processes.

Meanwhile, worries about indebted Chinese property giantEvergrande’s ability to stay afloat has roiled global markets in the last week. The real estate market, along with related industries such as construction, accounts for more than a quarter of China’s GDP, according to Moody’s estimates published in a late July report.

Fitch on Thursday lowered its China growth forecast to 8.1% from 8.4% on expectations a slowdown in the property market puts pressure on domestic demand.

Other economists haven’t cut their 2021 China GDP forecasts yet, but are watching a rising number of drags on growth.


  • Macquarie’s Chief China Economist Larry Hu said in an email Monday his 8.5% GDP estimate, set a year ago, is “facing downside risk now, given property slowdown and production cut.”
  • China Renaissance’s Bruce Pang, head of macro and strategy research, said Monday the firm hasn’t yet changed its GDP forecast of 8.4% either. But he said there could be a downward revision to 8.25% or 8.3% if the electricity shortage is prolonged, hitting not just energy-intensive industrial manufacturing but local livelihood and even services.
  • Allianz subsidiary Euler Hermes’ senior economist Francoise Huang said in an interview Thursday she is maintaining her GDP forecast of 8.2% for now, until she can get more clarity on “how much of [a] downward revision” she needs to make.
The central government in March set a much lower GDP target of over 6% expansion for the year. Analysts have noted policymakers are far more interested in the quality of economic growth than its pace.
“We believe it is unrealistic to expect China to maintain high and stable growth as Beijing delivers substantial shocks to both supply and demand sides,” Nomura’s Lu said in his report Friday.

Power supply crunch
On the supply side, he pointed to a “game changer” in mid-August when the national economic planning agency announced that 20 regions — accounting for about 70% of China’s GDP — failed to meet carbon-related targets, prompting local authorities to quickly take action.

“Regarding demand shocks,” Lu said, “China’s recent, sweeping regulatory crackdown on internet platforms, fintech, video games, off-campus tutoring, ride-hailing, data privacy, food delivery, crypto miners and e-cigarettes have been significant. The crackdown on off-campus tutoring may be especially negative for growth in Q3 and Q4 this year, as the entire sector has been decimated”

He lowered quarterly GDP forecasts to 4.7% year-on-year growth in the third quarter and 3% in the fourth.
China’s official release on third-quarter GDP is due out Oct. 18. The accuracy of government data is frequently doubted.

Spillover from Evergrande and real estate
Chinese authorities’ efforts to reduce high reliance on debt in the massive real estate sector in the last year have sent shares of indebted developer China Evergrande tumbling. The company has remained silent on an $83 million interest payment on its U.S. dollar-denominated debt that was due Thursday. The firm has a 30-day grace period.

If Evergrande’s troubles prompt a 10 percentage point slowdown in residential property activity, that could drag GDP growth down by roughly 1 percentage point, Morgan Stanley’s Chief Asia Economist Chetan Ahya said in a note Sunday, citing analysis from the firm’s chief China economist Robin Xing.

Ahya added the slowdown could result in a decline in private consumption and a drop in property investment that subsequently lowers fixed asset investment in related manufacturing sectors. “These spillover effects are creating downward pressure on growth at the same time that production cuts to meet energy intensity targets are weighing on growth,” Ahya said. “The regulatory reset is weighing on corporate sentiment and consumption is softening because of intermittent Covid-related restrictions.”

If the constraints on energy-intensive production remain, the Morgan Stanley analysts expect fourth-quarter GDP growth will be dragged down by about 1 percentage point. The investment bank currently forecasts 4.5% GDP growth in the third quarter from a year ago, and a slower 4% pace in the fourth quarter.


Expecting policy support
As negative factors add up, analysts expect Chinese authorities to ease policy and support growth.
“The government has not loosened policies because the economic pressure is not high enough,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note Sunday. “In particular, the unemployment rate has been relatively stable, and export growth has also been strong. The government may think they can afford to wait till the year end to loosen policies.”

He noted that the overseas market is not nearly as worried about a hard landing in China’s economy compared with previous declines in the MSCI China Index.

The drop in stocks this year has not affected the yuan exchange rate, Zhang said. “There [is] no sign of capital outflow, and the gap between the offshore [yuan] exchange rate and the onshore exchange rate did not widen. This shows that the current Evergrande incident has not caused panic on China’s macro economy in the international market.”

The MSCI China Index has fallen more than 18% so far this year. It tracks shares of Chinese companies traded in the mainland, Hong Kong and the U.S.
The offshore-traded yuan has fallen about 0.66% so far this year. Its gap with the onshore-traded yuan has remained within a range with an absolute value of 0.043 yuan, according to Wind Information.

https://www.cnbc.com/2021/09/27/nom...recast-as-power-crunch-drags-down-growth.html


Markets
Nickel Falls With Most Metals as China Power Crunch Spreads
Bloomberg News
September 27, 2021, 2:33 AM CDT

Nickel declined along with most metals as China’s power crisis spread from factories to residents, adding risks to supply chains, demand and the economic recovery.

Residents in several northern provinces have already been dealing with blackouts, while traffic lights are being turned off, causing chaos on the roads in at least one major city. That shows how quickly the country’s power crisis is escalating, adding the risk of social instability to an economic slowdown and global supply chain disruptions.

Economists at Nomura Holdings Ltd. and China International Capital Corp. have downgraded their growth forecasts as electricity shortages force businesses to cut back on production.

The power crunch in the top metals consuming country has already caused supply losses at metal smelters, fabricators and steel mills in the past few months. Prices of aluminum surged to the highest level since 2008 earlier this month as the energy-intensive sector was a major target of the country’s move to curb power usage.

For nickel, prices are under pressure as the energy crisis is curbing output mostly at stainless steel mills and power restrictions may tighten further into the fourth quarter, stock broker CICC said in a note on Monday.

Nickel fell as much as 2.9% to $18,830 ton on the London Metal Exchange before trading at $18,840 as of 7:53 a.m. local time. Zinc declined 0.9%, while copper rose 0.3%.

https://www.bloomberg.com/news/arti...ith-most-metals-as-china-power-crunch-spreads
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Crissa

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Shutting down for shift is more a cost thing than an availability thing, anyhow. And if they're not paying that higher price for energy, it's probably a net benefit to the workers (more concurrent jobs) and economy.

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Ogre

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These articles mention Tesla and/ or Apple whenever possible. Apple and Tesla have a lot of suppliers in common with a lot of other companies. Saying it affects component availability gets less attention than calling out Tesla and Apple.
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