Local suppliers feel the heat of Chinese power cuts

Power cuts in China have started to affect Bangladesh's garment and other industries reliant on raw material supply from the country, a blow that could derail the recovery of the economy from the coronavirus pandemic.

China is the main source of raw materials for export-oriented local garment, textile, garment accessories, pharmaceutical and plastic goods.

So, if production in the industries in the world's second-largest economy is hampered, it will have implications for Bangladesh.

Bangladesh imports nearly $18 billion worth of goods, mainly industrial raw material from China, the country's largest trading partner.

Take the example of Rassel Khandokar, country marketing representative of Bonher Textile, a Chinese textile supplier.

He supplied two million yards of fabrics in 2019 to garment factories.

In 2020, his business was severely affected due to the pandemic. He has sold 1.1 million yards of fabrics so far this year.

The electricity crisis in China comes at a time when Khandokar's business is recovering from the fallouts of the pandemic as the global supply chain is returning to normalcy.

The Chinese company mainly supplies fabrics that Bangladesh does not produce, like viscose, synthetic fabrics, man-made fibre yarn, fabrics for outerwear, and specialised fabrics for garment items.

Currently, 95 per cent of the man-made fibre yarn is imported from China.

"I don't know when I will be able to supply fabrics to our clients as our factory in China is not running in full swing because of the power cuts," Khandokar told The Daily Star.

"If we make any delay in supplying fabrics, the shipments from Bangladesh will also be delayed. So, a backlog will be created, and the local suppliers will face suspension or cancellation of orders and discounts."

The problem in China began on September 27 as Chinese workers returned to factories from the autumn holidays.

In China, during times of peak power consumption in the summer and winter, the problem becomes particularly acute. But this year, a number of factors have come together to make the issue especially serious, reported the BBC.

As the world starts to reopen after the pandemic, demand for Chinese goods is surging, and the factories making them need a lot more power.

Rules imposed by Beijing as it attempts to make the country carbon neutral by 2060 have seen coal production slow, even as the country still relies on coal for more than half of its power.

And as electricity demand has risen, the price of coal has been pushed up.

But with the government strictly controlling electricity prices, coal-fired power plants are unwilling to operate at a loss, with many drastically reducing their output instead, according to the BBC.

China is not getting an adequate supply of coal because of floods and bickering relationship with Australia, the major supplier of the fuel for the country.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, said Bangladesh would face a big loss due to the Chinese power crisis as many factories were dependent on the country.

"We may supply yarn for knitwear items but it is difficult to supply the raw materials for woven items."

Bangladesh may supply denim fabrics fully but it will not be able to meet the demand for other woven fabrics, he said, adding that he was also not getting the delivery of fabrics from China on time.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, said the Chinese power cut was a challenge for the local industry.

He said a lot of work orders was shifting to Bangladesh from China. 

"The relocation of the orders has created an opportunity for us, but the supply chain disruption will definitely affect our business, especially the recovery of our garment export."

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, said Bangladesh was not too dependent on China for the raw materials for the local plastic industry.

So, any disruption to the production in Chinese industries will not affect Bangladesh, said the entrepreneur, who is involved in the plastic industry.

Bangladesh imports a lot of pharmaceuticals ingredients for local drug industries, said Abdul Muktadir, senior vice-president of the Bangladesh Association of Pharmaceutical Industries.

Sixteen of mainland China's 31 provincial-level jurisdictions are rationing electricity as they race to meet Beijing's annual emissions reduction targets, according to the South China Morning Post.

The price of thermal coal, used for power generation, has been soaring all years and hit new highs in recent weeks.

China's army of small and medium-sized manufacturers have been hit hard by the nationwide power crisis, with outputs slashed and sweltering working conditions taking their toll, while panic buying of raw materials and goods is becoming commonplace over fears prices are set to soar, the newspaper said.