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China’s “power curtailment” measures in many places are triggering a “stopping wave” of Chinese A-share listed companies. Since last week, more than 10 listed companies have issued “temporary suspension and restriction of production” announcements. The heavy losses of energy-intensive sectors and individual stocks such as chemicals and coal on Monday also reflected the market’s worries about this “cold wave”.
According to a Reuters report, China’s electricity curtailment order triggered a wave of production suspensions by listed companies. According to analysts, the impact of the supply-side shock of China’s limited production and power restrictions may be underestimated by the market, and it is expected that this shock wave may spread and affect the global market.
Hunan Gold announced on Monday that its three subsidiaries will temporarily suspend and reduce production due to the impact of power restrictions, and the time to resume production is temporarily uncertain. The stock’s biggest intraday drop was nearly 9% on Monday, and it eventually closed down nearly 6%. China Jinling Mining and Jinpu Titanium both fell limit on Monday; Yingfeng shares, Limin shares, and Chenhua shares fell between 4-8%. These companies have successively issued announcements to stop production, claiming that the reason basically points to the “energy efficiency dual control” requirement of higher-level government departments. The China Securities A-share Resources Industry Index fell sharply by 5.5% during the intraday session on Monday, and closed down 4.63% at the end of the day.
According to Zhang Rui, chairman of the island assets, said to Reuters, “First of all, the dual control of energy consumption will definitely affect mining and manufacturing enterprises that consume more energy, and secondly, areas with relatively large power gaps and high urban densities.” Zhang Rui said that if the impact of power rationing is long-term, it will also affect the cost of consumer products along with price transmission.
Huaxin Securities analyst Yan Kaiwen told Reuters that he believes that the curtailment policy is to a certain extent an “active defense” against foreign trade companies and the industrial chain. He pointed out that China imports coal and bulk commodities at high prices, and then exports them to the United States with low or even zero profits. The United States uses the printed money to buy goods from China. This will lead to imported inflation in China. In fact, a large amount of Profits are placed on shipping and raw material costs.
Lu Ting, chief China economist at Nomura Securities, believes that the impact of this supply-side shock may be underestimated by the market. He predicted that this shock wave may spread and affect the global market. The world will feel the tightening of the supply of textiles, toys, and mechanical parts. The hot discussion on China is expected to change from “Hengda” to “power shortage” soon. .
Due to power shortages, Nomura has lowered China’s economic growth forecasts for the third and fourth quarters to 4.7% and 3% year-on-year, and lowered its GDP growth forecast for the whole year from 8.2% to 7.7%.
According to the report, Chinese President Xi Jinping said last week that China will not build new coal-fired power generation projects abroad, strengthening China’s commitment to combat climate change. Although no more details are provided, depending on the implementation of the policy, this move may greatly limit the financing of coal-fired power plants in developing countries.
According to a recent research report by CITIC Securities, from the perspective of objective economic operation, as overseas supply resumes, the global supply and demand gap is expected to narrow, and China’s exports will naturally fall, which means that energy consumption caused by the high industrial growth this year High growth is unsustainable. Even if there are no major adjustments to the dual control targets for energy consumption, after the industry returns to its normal growth rate, energy consumption indicators will be more generous, and administrative restrictions on production and electricity may naturally be reduced.
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