We still don’t have enough data to judge the extent of the disruption to China’s factory output from power rationing with much certainty. But with supply chains already stretched, even a modest hit to output, which producers downstream might normally cover by dipping into inventories, could affect firms’ ability to meet orders. It’s therefore concerning that the number of ships idling outside Chinese ports has jumped again in recent weeks. The initial catalyst for the spike was short-lived disruption to port operations from Typhoon Chanthu which hit China’s east coast on 12th But port congestion remaining very elevated more than two weeks later may be a sign that power rationing along the supply chain is interfering with ports’ ability to ship orders. Disruption is likely to worsen in the short-run given that the current shortage of thermal coal needed to meet power demand won’t be resolved overnight.
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