FOR IMMEDIATE RELEASE:
CHINA POWER/ELECTRICITY CURTAILMENTS MANDATED
WILL THIS DELAY NAIL SHIPMENTS?
Dear Valued Customer;
Abington, PA (10/04/2021) – Container shipping issues have been a challenge. January’s $6,000 ocean freight is now over $30,000 in many cases. Port delays have not improved, but they pale in comparison to interior USA rail delays. Union Pacific had a 25 mile train backup near Chicago. CMI has containers in Chicago area not delivered yet that are now over 11 weeks since they unloaded in California. These are issues we have been dealing with all year, and most likely will continue to have to navigate through Mid - 2022.
COSTCO has joined the elite group of Mega Shippers that has chartered its own container ship to handle 1000 containers a month of its demand. That is 4 of the Top 10 shippers backfilling their requirements with their own shipping.
Now the next challenge has hit very quickly. The world’s second largest economy and Global Manufacturing Powerhouse has implemented massive electrical curtailments.
China is the world’s largest consumer of coal, using 50% of the global coal supply to fuel the majority of their electric supply, 60% of the power plants are run solely from coal. Factories in all industries are being notified to schedule 3 days per week of closure to assist with the electric supply issues being driven by coal shortages. While enforcement is not always followed at the factory level, 20 of China’s 32 provinces have seen rolling blackouts, predominately in the Northern provinces, which is why we sent out the prior notice on Plastic Cap delays. Plastic Caps are predominately made in the North so the electrical curtailments hit them much quicker. Plastic Cap capacity is almost fully booked prior to the Chinese Lunar New Year scheduled Holiday with 3 weeks of idle plants in late January.
Below information from Wall St. Journal and Bloomberg
How bad is the energy crisis in China?
The situation is widespread. In recent days, factories in 20 of China’s 31 provinces have suffered a loss of power, forcing many to shut down production, at least for hours at a time. Millions of households in the north-east of the country have also lost power and found that they cannot use electricity to heat or light their homes.
Is the situation getting worse?
The US carmaker Tesla, which has a large factory in China, is among many industrial firms that have been put on notice of longer shutdowns next week as the lack of electricity becomes acute in some regions. Most analysts believe it could take several months for the Chinese authorities to get a grip and match energy production with rising demand.
Is China struggling to produce electricity?
No, there is the capacity to generate electricity. Since the beginning of the year electricity production has increased by about 10% as the economy has bounced back from the pandemic. It’s just that the Chinese energy juggernaut has run out of steam after running down stocks of coal apparently in the hope that either Beijing would lift all environmental restrictions that increase the cost of producing electricity with coal or that world prices would fall. While Beijing has eased some emissions targets, world prices have carried on soaring.
What is the industry’s response?
Energy companies are, in effect, rationing electricity to industrial and domestic users under orders from president Xi Xinping’s officials to not pass on the higher costs from rising prices of imported coal.
What is happening to fuel prices?
China has dramatically reduced its coal consumption since 2017, cutting back the proportion used to generate electricity from more than 80% to 51.8% in 2019. Renewable energy, including wind and solar, has made up most of the difference. But with more than half of all electricity still made using coal, generators remain heavily reliant on the black stuff.
Does China import coal?
It is the world’s largest importer of coal ahead of India. Coal prices have soared in recent months in response to rising demand. The situation is made worse for China by a spat last year with Australia over Canberra’s call for an international probe of the origins of the coronavirus pandemic. Beijing imposed an unofficial ban on imports from Australia, the world’s second largest exporter, making it more dependent on higher priced coal from domestic suppliers and elsewhere.
WHAT DOES THIS MEAN FOR ROOFING NAILS AND THESE TYPES OF PRODUCTS?
The unknown is how much capacity will be lost by nail plants due to electrical curtailments. Most plants are sold out through November production, which means January arrivals, so they can’t add more. Will they lose 25% to 30% during this energy shutdown? If orders / production get pushed then we are starting to run against the clock before the late January planned 3 week Holiday. Customers that are starting to feel like there inventory is sufficient could be in for problems if all of the sudden new orders get pushed to post Lunar New Years.
Please plan accordingly and you should be able to have a steady flow of material. If you would like to review your requirements please reach out to your CMI Regional Manager.
Our goal is to always keep you informed to the best of our ability and the reason why we are the Largest Direct Importer of Roofing Nails into the US market.
Continental Materials, Inc. (CMI) is a national supplier of roofing system component materials and known for BUR (built-up roofing) asphalt with “No Smell”™ odor eliminating technology and its WeatherSeal™ protective packaging, All-Weather™ asphalt felts and coated organic rolls, CMI All-Weather™ modified bitumen rolls, SureGrip™ construction fasteners and roofing nails, Continental’s eco-friendly high density fiberboard roof insulation board and a premium line of SecureGrip™ synthetic roof underlayment products that are sold and used widely throughout the country. CMI has provided value added products and superior service to the roofing industry since 1958.
For more information on CMI products, call (215) 884-4930, visit www.continentalmaterials.com or contact your local CMI Sales Representative.