Energy shortages starting to ease

Despite a flurry of media reports in September hinting at widespread disruption, the data suggest that China’s recent power shortages have not been too severe. Electricity output actually rose 0.6% in seasonally-adjusted m/m terms last month, the fastest pace this year. But even with this ramp up in electricity generation, power plants were clearly struggling to keep up with rising demand amid dwindling thermal coal inventories, forcing them to ration power to some users. The good news is that the situation has been improving in recent weeks. Stockpiles of coal at power plants have started to rise again. So have inventories at Chinese ports. And in a sign that power rationing is probably easing, domestic output prices in the parts of industry hardest hit by the shortages, such as cement and chemicals, appear to be levelling off. While this may partly reflect a ramp up in coal production and imports, a slowdown in final demand for industrial goods, especially from the construction sector, is probably helping too.