Asian Markets

September 27, 2021

Chinese Spandex Update

Will spandex price plunge with weaker demand?
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Spandex prices continued surging in recent one year and current price has hit the highest level since 2008. Recently, export orders did not chase up smoothly and domestic demand was soft. Some dealers started revising down price. Will spandex price plunge later? Does market fundamentals of spandex change?  blob.png Supply There will be above 110kt/year of new spandex capacity to be launched in the second half of 2021 in Chinese mainland and it may bring about 30kt of production increase according to the startup time. By Sep 26, the operating rate of spandex plants declined to 93% from 97% in end-Aug. The control of total amount and the intensity of energy consumption is expected to affect spandex supply in short run. Some spandex plants scaled down production by around 10-40%. Xiamen Lilong suspended production due to the pandemic, affecting near 2% of spandex operation rate. Most old spandex units are still expected to run at above 90% of capacity and new units will gradually start operation.

Spandex production is anticipated to gradually ascend in Q4. blob.png Inventory The spandex inventory inched up but remained low now (the normal level was 30 days), supportive to price. By Sep 26, spandex inventory rose by around 8.5 days to above 13 days compared with early-Aug.  Supply tightness of conventional spandex varieties has eased, while stocks of medium-to-high denier spandex rose rapidly. The order change still should be concerned in Oct. If orders chase up, spandex inventory may accumulate slowly even if fabric mills only purchase spandex on a need-to-basis. That means price of spandex may be late to reduce. The price competition is supposed to be fierce again if the gap between production and sales expands demand.

The tempo of traditional peak season and dull season has been disrupted by the pandemic. The operating rate of downstream fabric mills was around 20 percentage points higher on the year in Jan-Aug, 2021 and around 10 percentage points higher than the 2019 level. However, the run rate apparently dipped after Aug. Affected by the control of total amount and intensity of energy consumption, dyeing plants’ operating rate obviously dropped in Zhejiang and Jiangsu, which will be bearish for the later operating rate of fabric mills.  blob.png The inventory of elastic fabrics was not high now. Stocks of some nylon/spandex air covered yarn, dralon fabrics and small circular knitting fabrics were above 1 month, mainly for the production of autumn and winter clothes. The stocks of high-density circular knitted fabric, polyester/spandex air covered yarn, cotton core-spun yarn and warp knitting super soft fabric were at 10-15 days.  Downstream buyers were unwilling to hoard up stocks when price of polyester and cotton was weak and that of NFY rose limitedly.

Price of spandex stopped rising and turned to shiver recently. Supported by low inventory, stable spandex price was supportive to the stabilizing of grey fabric price and the processing fee of covered yarn. If spandex price dips apparently, earlier spandex inventory will be depreciated and it will have negative influence on later orders for fabrics.  Cost Prices of PTMEG and BDO apparently rose and major feedstock cost of spandex was above 41,000yuan/mt for the first time, while spandex price shivered at high level. The price spread between spandex and its major feedstock has apparently narrowed to 7,500yuan/mt since end-Jul. 

Spandex price may be peaked affected by limited downstream orders and the control of total amount and intensity of energy consumption. Weakening demand surrenders weaker support to spandex price. Some spandex suppliers have revised down price. Spandex market are turning to be buyers’ market. Many buyers require discounts in actual transactions. Few dealers and fabric mills start underselling spandex. Price of spandex is not expected to plunge in short run supported by low inventory and firm feedstock price. New spandex units are scheduled to gradually commission operation and stocks of spandex may not rise much in short run. Therefore, price of spandex is expected to be firm in short run but weak in long run.

https://www.ccfgroup.com/newscenter/newsview.php?Class_ID=D00000&Info_ID=2021092730047

September 27, 2021

Dual Control System

China says to firmly control energy-hungry and high-emission projects CGTN

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China’s National Development and Reform Commission issues a plan to improve the country’s “dual control system” on energy consumption and energy intensity, September 11, 2021. /CFP

China will firmly control energy-hungry and high-emission projects, the National Development and Reform Commission said in a recently issued plan, according to a notice released on Thursday. 

The plan aims to improve China’s “dual control system” on energy consumption and energy intensity, or the amount of energy consumed per unit of GDP. 

The dual control system, first set in the country’s 11th Five-Year Plan (2006-2010), has taken on added significance since Chinese President Xi Jinping in September 2020 committed the country to peaking carbon emissions by 2030 and becoming carbon neutral by 2060. 

According to the plan, China will set a five-year target of energy consumption and energy intensity for different provinces, autonomous regions and municipalities, in an effort to reasonably manage indicators of total energy consumption and energy intensity.

The plan also clarified a series of phased goals of China.

By 2025, the dual control system will be more complete, with a more reasonable allocation of energy resources and sharply improved energy utilization efficiency. 

By 2030, with a further improved dual control system, the intensity of energy consumption will continue to drop significantly, the total energy consumption be reasonably controlled and the energy structure be more optimized. 

By 2035, the optimal allocation of energy and the comprehensive conservation system of resources will be more mature and finalized, which will strongly support the achievement of the goal of steadily reducing carbon emissions after reaching the peak.

https://news.cgtn.com/news/2021-09-16/China-says-to-firmly-control-energy-hungry-and-high-emission-projects-13BHlfbRCes/index.html

September 27, 2021

Dual Control System

China says to firmly control energy-hungry and high-emission projects CGTN

Share

China’s National Development and Reform Commission issues a plan to improve the country’s “dual control system” on energy consumption and energy intensity, September 11, 2021. /CFP

China will firmly control energy-hungry and high-emission projects, the National Development and Reform Commission said in a recently issued plan, according to a notice released on Thursday. 

The plan aims to improve China’s “dual control system” on energy consumption and energy intensity, or the amount of energy consumed per unit of GDP. 

The dual control system, first set in the country’s 11th Five-Year Plan (2006-2010), has taken on added significance since Chinese President Xi Jinping in September 2020 committed the country to peaking carbon emissions by 2030 and becoming carbon neutral by 2060. 

According to the plan, China will set a five-year target of energy consumption and energy intensity for different provinces, autonomous regions and municipalities, in an effort to reasonably manage indicators of total energy consumption and energy intensity.

The plan also clarified a series of phased goals of China.

By 2025, the dual control system will be more complete, with a more reasonable allocation of energy resources and sharply improved energy utilization efficiency. 

By 2030, with a further improved dual control system, the intensity of energy consumption will continue to drop significantly, the total energy consumption be reasonably controlled and the energy structure be more optimized. 

By 2035, the optimal allocation of energy and the comprehensive conservation system of resources will be more mature and finalized, which will strongly support the achievement of the goal of steadily reducing carbon emissions after reaching the peak.

https://news.cgtn.com/news/2021-09-16/China-says-to-firmly-control-energy-hungry-and-high-emission-projects-13BHlfbRCes/index.html

September 27, 2021

Chinese Energy Woes

Millions Of Chinese Residents Lose Power After Widespread, “Unexpected” Blackouts; Power Company Warns This Is “New Normal”

by Tyler DurdenMonday, Sep 27, 2021 – 12:40 PM

Just yesterday we warned that a “Power Supply Shock Looms” as the energy crisis gripping Europe – and especially the UK – was set to hammer China, and just a few hours later we see this in practice as residents in three north-east Chinese provinces experienced unannounced power cuts as the electricity shortage which initially hit factories spreads to homes.

People living in Liaoning, Jilin and Heilongjiang provinces complained on social media about the lack of heating, and lifts and traffic lights not working.

Local media in China – which is highly dependent on coal for power – said the cause was a surge in coal prices leading to short supply. As shown in the chart below, Chinese thermal coal futures have more than doubled in price in the past year.

There are several reasons for the surge in thermal coal, among them already extremely tight energy supply globally (that’s already seen chaos engulf markets in Europe); the sharp economic rebound from COVID lockdowns that has boosted demand from households and businesses; a warm summer which led to extreme air condition consumption across China; the escalating trade spat with Australia which had depressed the coal trade and Chinese power companies ramping up power purchases to ensure winter coal supply. Then there is Beijing’s pursuit of curbing carbon emissions – Xi Jinping wants to ensure blue skies at the Winter Olympics in Beijing next February, showing the international community that he’s serious about de-carbonizing the economy – that has led to artificial bottlenecks in the coal supply chain.

The coal price surge prompted the China Electricity Council to publish a statement saying that “to ensure winter coal supply, power companies continue to increase market purchases *regardless of cost* under the situation of substantial losses.”

Whatever the reason, it’s just getting started: as BBC reported, one power company said it expected the power cuts to last until spring next year, and that unexpected outages would become “the new normal.” Its post, however, was later deleted.

At first, the energy shortage affected factories and manufacturers across the country, many of whom have had to curb or stop production in recent weeks. In the city of Dongguan, a major manufacturing hub near Hong Kong, a shoe factory that employs 300 workers rented a generator last week for $10,000 a month to ensure that work could continue. Between the rental costs and the diesel fuel for powering it, electricity is now twice as expensive as when the factory was simply tapping the grid.

“This year is the worst year since we opened the factory nearly 20 years ago,” said Jack Tang, the factory’s general manager. Economists predicted that production interruptions at Chinese factories would make it harder for many stores in the West to restock empty shelves and could contribute to inflation in the coming months.

Three publicly traded Taiwanese electronics companies, including two suppliers to Apple and one to Tesla, issued statements on Sunday night warning that their factories were among those affected. Apple had no immediate comment, while Tesla did not respond to a request for comment.

But over the weekend residents in some cities saw their power cut intermittently as well, with the hashtag “North-east electricity cuts” and other related phrases trending on Twitter-like social media platform Weibo.

The extent of the blackouts is not yet clear, but nearly 100 million people live in the three provinces.

In Liaoning province, a factory where ventilators suddenly stopped working had to send 23 staff to hospital with carbon monoxide poisoning.

There were also reports of some who were taken to hospital after they used stoves in poorly-ventilated rooms for heating, and people living in high-rise buildings who had to climb up and down dozens of flights of stairs as their lifts were not functioning. Some municipal pumping stations have shut down, prompting one town to urge residents to store extra water for the next several months, though it later withdrew the advice.

One video circulating on Chinese media showed cars travelling on one side of a busy highway in Shenyang in complete darkness, as traffic lights and streetlights were switched off. City authorities told The Beijing News outlet that they were seeing a “massive” shortage of power.

Social media posts from the affected region said the situation was similar to living in neighboring North Korea.

The Jilin provincial government said efforts were being made to source more coal from Inner Mongolia to address the coal shortage.

As noted previously, power restrictions are already in place for factories in 10 other provinces, including manufacturing bases Shandong, Guangdong and Jiangsu.

Of course, a key culprit behind China’s shocking blackouts is Xi Jinping’s recent pledge that his country will reach peak carbon emissions within nine years. As a reminder, two-thirds of China’s electricity comes from burning coal, which Beijing is trying to curb to address climate change. While coal prices have surged along with demand, because the government keeps electricity prices low, particularly in residential areas, usage by homes and businesses has climbed regardless.

Faced with losing more money with each additional ton of coal they burn, some power plants have closed for maintenance in recent weeks, saying that this was needed for safety reasons. Many other power plants have been operating below full capacity, and have been leery of increasing generation when that would mean losing more money, said Lin Boqiang, dean of the China Institute for Energy Policy Studies at Xiamen University.

“If those guys produce more, it has a huge impact on electricity demand,” Professor Lin said, adding that China’s economic minders would order those three industrial users to ease back.

Meanwhile, even as it cracks down on conventional fossil fuels, China still does not have a credible alternative “green” source of energy. Adding insult to injury, various regions have been criticized by the government for failing to make energy reduction targets, putting pressure on local officials not to expand power consumption, the BBC’s Stephen McDonell reports.

And while the blackouts starting to hit household power usage are at most an inconvenience, if one which may soon result in even more civil unrest if these are not contained, a bigger worry is that the already snarled supply chains could get even more broken, leading to even greater supply-disruption driven inflation.

As Source Beijing reports, several chip packaging service providers of Intel and Qualcomm were told to shut down factories in Jiangsu province for several days amid what could be the worst power shortage in years.

The blackout is expected to affect global semiconductor supplies – which as everyone knows are already highly challenged – if the power cuts extend during winter.

The NYT confirms as much, writing today that the electricity shortage is starting to make supply chain problems worse. The sudden restart of the world economy has led to shortages of key components like computer chips and has helped provoke a mix-up in global shipping lines, putting in the wrong places too many containers and the ships that carry them.

Nationwide power shortages have prompted economists to reduce their estimates for China’s growth this year. Nomura, a Japanese financial institution, cut its forecast for economic expansion in the last three months of this year to 3 percent, from 4.4 percent.

It is not clear how long the power crunch will last. Experts in China predicted that officials would compensate by steering electricity away from energy-intensive heavy industries like steel, cement and aluminum, and said that might fix the problem. State Grid, the government-run power distributor, said in a statement on Monday that it would guarantee supplies “and resolutely maintain the bottom line of people’s livelihoods, development and safety.”

Maybe China should just blame bitcoin miners for the crisis to avoid public anger… alas, it can’t do that since it already banned them and drove most of its technological innovators out of the country.

https://www.zerohedge.com/markets/millions-chinese-residents-lose-power-after-widespread-unexpected-blackouts-power-company

September 27, 2021

Chinese Energy Woes

Millions Of Chinese Residents Lose Power After Widespread, “Unexpected” Blackouts; Power Company Warns This Is “New Normal”

by Tyler DurdenMonday, Sep 27, 2021 – 12:40 PM

Just yesterday we warned that a “Power Supply Shock Looms” as the energy crisis gripping Europe – and especially the UK – was set to hammer China, and just a few hours later we see this in practice as residents in three north-east Chinese provinces experienced unannounced power cuts as the electricity shortage which initially hit factories spreads to homes.

People living in Liaoning, Jilin and Heilongjiang provinces complained on social media about the lack of heating, and lifts and traffic lights not working.

Local media in China – which is highly dependent on coal for power – said the cause was a surge in coal prices leading to short supply. As shown in the chart below, Chinese thermal coal futures have more than doubled in price in the past year.

There are several reasons for the surge in thermal coal, among them already extremely tight energy supply globally (that’s already seen chaos engulf markets in Europe); the sharp economic rebound from COVID lockdowns that has boosted demand from households and businesses; a warm summer which led to extreme air condition consumption across China; the escalating trade spat with Australia which had depressed the coal trade and Chinese power companies ramping up power purchases to ensure winter coal supply. Then there is Beijing’s pursuit of curbing carbon emissions – Xi Jinping wants to ensure blue skies at the Winter Olympics in Beijing next February, showing the international community that he’s serious about de-carbonizing the economy – that has led to artificial bottlenecks in the coal supply chain.

The coal price surge prompted the China Electricity Council to publish a statement saying that “to ensure winter coal supply, power companies continue to increase market purchases *regardless of cost* under the situation of substantial losses.”

Whatever the reason, it’s just getting started: as BBC reported, one power company said it expected the power cuts to last until spring next year, and that unexpected outages would become “the new normal.” Its post, however, was later deleted.

At first, the energy shortage affected factories and manufacturers across the country, many of whom have had to curb or stop production in recent weeks. In the city of Dongguan, a major manufacturing hub near Hong Kong, a shoe factory that employs 300 workers rented a generator last week for $10,000 a month to ensure that work could continue. Between the rental costs and the diesel fuel for powering it, electricity is now twice as expensive as when the factory was simply tapping the grid.

“This year is the worst year since we opened the factory nearly 20 years ago,” said Jack Tang, the factory’s general manager. Economists predicted that production interruptions at Chinese factories would make it harder for many stores in the West to restock empty shelves and could contribute to inflation in the coming months.

Three publicly traded Taiwanese electronics companies, including two suppliers to Apple and one to Tesla, issued statements on Sunday night warning that their factories were among those affected. Apple had no immediate comment, while Tesla did not respond to a request for comment.

But over the weekend residents in some cities saw their power cut intermittently as well, with the hashtag “North-east electricity cuts” and other related phrases trending on Twitter-like social media platform Weibo.

The extent of the blackouts is not yet clear, but nearly 100 million people live in the three provinces.

In Liaoning province, a factory where ventilators suddenly stopped working had to send 23 staff to hospital with carbon monoxide poisoning.

There were also reports of some who were taken to hospital after they used stoves in poorly-ventilated rooms for heating, and people living in high-rise buildings who had to climb up and down dozens of flights of stairs as their lifts were not functioning. Some municipal pumping stations have shut down, prompting one town to urge residents to store extra water for the next several months, though it later withdrew the advice.

One video circulating on Chinese media showed cars travelling on one side of a busy highway in Shenyang in complete darkness, as traffic lights and streetlights were switched off. City authorities told The Beijing News outlet that they were seeing a “massive” shortage of power.

Social media posts from the affected region said the situation was similar to living in neighboring North Korea.

The Jilin provincial government said efforts were being made to source more coal from Inner Mongolia to address the coal shortage.

As noted previously, power restrictions are already in place for factories in 10 other provinces, including manufacturing bases Shandong, Guangdong and Jiangsu.

Of course, a key culprit behind China’s shocking blackouts is Xi Jinping’s recent pledge that his country will reach peak carbon emissions within nine years. As a reminder, two-thirds of China’s electricity comes from burning coal, which Beijing is trying to curb to address climate change. While coal prices have surged along with demand, because the government keeps electricity prices low, particularly in residential areas, usage by homes and businesses has climbed regardless.

Faced with losing more money with each additional ton of coal they burn, some power plants have closed for maintenance in recent weeks, saying that this was needed for safety reasons. Many other power plants have been operating below full capacity, and have been leery of increasing generation when that would mean losing more money, said Lin Boqiang, dean of the China Institute for Energy Policy Studies at Xiamen University.

“If those guys produce more, it has a huge impact on electricity demand,” Professor Lin said, adding that China’s economic minders would order those three industrial users to ease back.

Meanwhile, even as it cracks down on conventional fossil fuels, China still does not have a credible alternative “green” source of energy. Adding insult to injury, various regions have been criticized by the government for failing to make energy reduction targets, putting pressure on local officials not to expand power consumption, the BBC’s Stephen McDonell reports.

And while the blackouts starting to hit household power usage are at most an inconvenience, if one which may soon result in even more civil unrest if these are not contained, a bigger worry is that the already snarled supply chains could get even more broken, leading to even greater supply-disruption driven inflation.

As Source Beijing reports, several chip packaging service providers of Intel and Qualcomm were told to shut down factories in Jiangsu province for several days amid what could be the worst power shortage in years.

The blackout is expected to affect global semiconductor supplies – which as everyone knows are already highly challenged – if the power cuts extend during winter.

The NYT confirms as much, writing today that the electricity shortage is starting to make supply chain problems worse. The sudden restart of the world economy has led to shortages of key components like computer chips and has helped provoke a mix-up in global shipping lines, putting in the wrong places too many containers and the ships that carry them.

Nationwide power shortages have prompted economists to reduce their estimates for China’s growth this year. Nomura, a Japanese financial institution, cut its forecast for economic expansion in the last three months of this year to 3 percent, from 4.4 percent.

It is not clear how long the power crunch will last. Experts in China predicted that officials would compensate by steering electricity away from energy-intensive heavy industries like steel, cement and aluminum, and said that might fix the problem. State Grid, the government-run power distributor, said in a statement on Monday that it would guarantee supplies “and resolutely maintain the bottom line of people’s livelihoods, development and safety.”

Maybe China should just blame bitcoin miners for the crisis to avoid public anger… alas, it can’t do that since it already banned them and drove most of its technological innovators out of the country.

https://www.zerohedge.com/markets/millions-chinese-residents-lose-power-after-widespread-unexpected-blackouts-power-company