Power outages hit chemical makers in China

China’s chemical sector is enjoying a profit surge, but continued prosperity is threatened by spreading power outages and the nation’s attempt to control carbon emissions.

China’s National Bureau of Statistics says profits in the chemical industry rose by 145% in the first 8 months of the year, nearly tripling the average industrial profit increase.

But the streak could be coming to an end. In recent days, at least a dozen stock market–listed Chinese chemical manufacturers—ranging from fertilizer producers to polyester fiber firms—have announced production curtailments due to lack of electricity.

In addition, on Sept. 23, the US firm Celanese declared force majeure for several polymers after it was forced to shut down acetic anhydride and vinyl acetate facilities in Nanjing, in Jiangsu Province, to comply with government orders. Nationwide, thousands of chemical factories could be impacted by power cuts, says China Petrochemical News.

The publication quotes several chemical firms’ executives in Jiangsu Province and the regions of Inner Mongolia and Ningxia as complaining that the unstable electricity supply is hampering maintenance, feedstock loading, and production safety.

Firms in the eastern provinces of Jiangsu and Guangdong, which host many of China’s chemical manufacturers, are suffering the most, as these provinces have failed to reach the central government’s dual targets of decreasing energy use per capita by 3% annually and controlling the growth of total energy consumption.

The energy reduction goal, tied to China’s overall carbon emission reduction goals, is only one cause of the power outages. In addition, China’s power companies, caught between surging coal prices and government-capped electricity prices, are reluctant to produce more electricity at a loss.

One silver lining of the production cutbacks is rising prices for some chemicals. Moreover, according to Zhao Zhen, a Shanghai-based chemical consultant, the power-supply control measures should push chemical firms to be more energy efficient and to focus on higher-value products.