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With energy prices skyrocketing coupled with China's clean energy transition strategy to lower emissions Zhejiang province authorities ordered around 160 energy-intensive companies to temporarily halt production.

Factory Zhejiang China

Zhejiang is Eastern China's manufacturing hub, the energy intense industries textile, dyeing and chemical fiber are those most affected by the order. Nearly 80% of the affected companies are in Ma'an, where a production halt order was issued for Sept. 21-30 a community official at Ma'an area in Shaoxing city, in northeastern Zhejiang province said.

Zhejiang was among several provinces to receive a "second-level warning" in a document issued by the National Development and Reform Commission in August. Second level refers to those that face severe challenges to meet the energy targets set out by the central government. China's central government carbon policy has been ordering local authorities to reduce energy consumption as part of a national green transition strategy to lower emissions of greenhouse gases.

The CCP aim is to reduce national energy consumption per unit of GDP by 13.5% from 2020 by 2025 and cutting carbon emissions 18%. Local governments have been given specific reduction goals. The Zhejiang provincial government released a five-year plan in May requiring high energy-consuming industries including textiles, dyeing and plastics to upgrade their technology and improve business efficiency.

China's most important textile industry base

The edict is not without consequence as the Keqiao district in Shaoxing, which oversees Ma'an, accounts for 30% of national capacity of China's textile industry base, Several publicly traded companies have disclosed production halts. Zhejiang Yingfeng Technology and Zhejiang Xidamen New Material filed with the Shanghai Stock Exchange suspendeing production under the power control order.

A dyeing company executive in Keqiao told Caixin that his business received the production halt order Tuesday. "The suspension is quite long, and it will definitely affect business as order deliveries will be delayed," the executive said.

There is more to the story though, China has been battling high commodity prices which are adding to massive deficits in the country with rampant price inflation. Power generators in Shaoxing have been under pressure from year's coal shortage, worsening the power supply shortfall. Last week, two local electricity suppliers issued warnings about short supply due to surging coal costs. Given the situation it is an opportunistic time for Central command to play the "Green card' and have outside eyes focus on that.

In addition to textiles, several steel companies in Zhejiang have been ordered to reduce output over the past week, steel industry portal Mysteel.com showed. The neighboring province of Jiangsu, home to several major petrochemical producers, also ordered local mills to cut production.

via Caixin.

From The TradersCommunity Research Desk

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