The Everything Shortage keeps promising to keep getting worse.
By Wolf Richter for WOLF STREET.
Amid China’s many crackdowns is a crackdown on energy consumption, motivated by a slew of reasons, including most pressingly, spiking prices for coal and natural gas, particularly Liquefied Natural Gas. China is the second largest importer of LNG behind Japan. As Europe and Asia compete for supply, the price of LNG for November delivery to Japan and Korea has exploded to $27.45 per million British thermal units on the NYMEX, up from the $6-range a year ago (chart via CME Group):
In addition to the spike in energy prices, there are the government’s efforts to reduce emissions and to tamp down on the growth of energy consumption. To that effect, China has imposed a number of policies. The crackdown on bitcoin mining falls into this category.
This crackdown on energy consumption, handed down from Beijing to provinces and cities, is now taking the form of suspensions or reductions of industrial electricity supply that manufacturers in numerous industries are hit with, including key facilities that produce components for Apple, Tesla, Intel, Nvidia, Qualcomm, NXP, Infineon, and ASE Tech, along with many smaller manufacturers. They’re now under orders to temporarily halt production.
The provinces that haven’t lived up to Beijing’s demands to reduce total energy consumption are having to hand out suspensions of industrial electricity supply; they include the provinces of Liaoning, Jilin, and Heilongjiang, according the Nikkei Asia. Jiangsu, Zhejiang, Guangdong, and other provinces are subject to restrictions on industrial electricity supply.
Production halts now starting at...
On Sunday, Taiwanese companies with manufacturing operations in China disclosed in filings with the Taiwan stock exchange, cited by the Nikkei Asia, that they have to halt operations at some of their plants in China:
Eson Precision Engineering, an affiliate of Foxconn and a key mechanical parts supplier for Apple and Tesla, disclosed in a filing with the Taiwan stock exchange on Sunday that it would suspend its production from Sunday until Friday at its facilities in the city of Kunshan, Jiangsu Province, in response to the city’s policy of stopping electricity supply for industrial use.
“The company will leverage its inventory to maintain the operation while production is halted,” Eson said in the filing. “We expect to arrange production on the weekends or in the upcoming holidays [next month] to meet customers’ needs.”
Unimicron Technology, a print circuit-board maker and Apple supplier, disclosed in filing with the Taiwan stock exchange that its subsidiaries in Suzhou and Kunshan, both in Jiangsu Province, would stop production from Sunday until the end of September. It said it would mobilize production capacity in its other manufacturing sites to mitigate the impact.
Concraft Holding, which makes iPhone speaker components and owns manufacturing facilities in Suzhou, Jiangsu Province, disclosed in a filing with the Taiwan stock exchange that it would suspend production from Sunday through Thursday and rely on its inventory to support demand.
Chang Wah Technology, a leading chip-packaging material maker supplying NXP, Infineon, and ASE Tech Holding, disclosed in a filing with the Taiwan stock exchange on Sunday that it has to halt production from Sunday through the end of the September.
Nikkei Asia, citing sources, said that the facilities in Jiangsu Province of several chip packaging and testing service providers that supply Intel, Nvidia, and Qualcomm also received notices to suspend production.
Small and medium-size enterprises have also been hit with the energy consumption crackdown, according to the Nikkei. An electronics supplier in Dongguan, Guangdong Province, told the Nikkei Asia that they had also received notice that their electricity would be cut from September 25 through 28 every day from 8 a.m. to midnight. “We could only ask our production-line workers to take night shifts to rush some products out,” they told the Nikkei.
A broad range of industries has been affected by the energy crackdown, including electronic goods manufacturing, a sector that produces a lot of goods for export.
In the not-yet category:
Pegatron, which assembles iPhones and operates large production sites in Suzhou and Kunshan, Jiangsu Province, told the Nikkei that its facilities were running as usual at the moment, but had already prepared power generators in case it receives the notice from the city government.
Foxconn’s vast manufacturing plants in Longhua and Guanlan (Guangdong Province), Taiyuan (Shanxi Province), and Zhengzhou (Henan Province) had not yet been hit by the restrictions on power consumption “as of Sunday,” according to sources cited by the Nikkei.
Foxconn’s plant in Zhengzhou, employing about 350,000 workers, produces about half of the iPhones in the world. The area was already hit by flooding in July that halted production, and industry observers at the time speculated that the flooding would delay the production of Apple’s new iPhone 13 series.
So we will see if there are additional ripple effects of those production halts.
When supply chains are already in trouble, with shortages spreading across a wide variety of unlikely products and components, made worse by natural disasters in the US, China, and other countries, and made worse by Covid infections in Malaysia and Indonesia that have shut down manufacturing plants, every little thing adds further distress and entanglements. And this comes at the worst time, just before the holiday shopping season, amid blistering demand from the most grotesquely overstimulated economy ever in the US.
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Better get a manual typewriter before they are sold out on OfferUp and Craigslist.
Oh no! Not correction fluid again!
I met someone recently who still carries a bottle of white out in their purse, just for that special occasion.
Does this person work at the DMV lol
bet china could get some CHEAP COAL from aussieland
oh, forgot they REFUSE TO BUY FROM THEM
boy does free market work great
Better stock up on carbon paper as well. Is there a shortage of pencils yet?
As a former computer consultant I know better than to have important information located only in some digital device.
@TT
I never have less than 3 computers at any one time, is that OK?
They are flying across the Atlantic on 2 engines nowadays. No, I didn’t mean the 737.
I have a portable one, but good luck getting the roll of tape for it.
I still have my Hermes 3000 typewriter that I bought in graduate school some 50 years ago.
Now that iPhone parts and assembly plants are in danger of losing production, I wonder if any plants producing phones for Huawei are in the same boat? I didn’t see any mention of that in the article Wolf linked.
Huawei has fewer phones than before, it sold off the Honor series last year. Still has a couple
Other lines left at this point, more of their high end stuff.
Still no satisfactory explanation why there is an energy shortage.
If the price of coal (of which China produces it’s own coal) and LNG are up, then past the cost onto the product and the consumer.
There has to be something more to this.
Maybe they don’t want to crush their own workers under onerous energy bills and awful pollution from millions of small coal fires.
I know it’s a strange concept to think that leaders anywhere have even slight concern for the masses, but it is possible.
Personally I would like to have a good idea of what life is like for average Chinese workers, good, bad, or ugly, but that is pretty near impossible in the current climate of preposterous propaganda.
China doesn’t produce enough for their needs. A long time ago, certainly in the 80s, China exported coal… but not any more, if you look at the proportion of how energy is generated, coal I believe still is the largest individual component.
China’s viewpoint is that it has sufficient energy needs to justify all approaches, it doesn’t have the same luxury as the west in terms of picking and choosing the types of energy. To do so would be economic and social suicide.
The funny thing is that a combination of NIMBYism and corporate greed created the situation. To this day, I hear zero complaints about the pollution in Inner Mongolia where rare earth is mined… hint, it isn’t a clean process.
If the west wants to complain to China about climate change as the Dumbos want to do all the time, and now even the Donkeys… The appropriate starting points are Seattle, Cupertino, and Bentonville. The brand of corporate virtue signaling in the US is the worst of all, those companies mentioned above all pledged to be carbon neutral… but only with respect to their own internal footprint, not the supply chain they spawned, and by the way, they do that using a cap and trade scheme that just lumps off the responsibility onto someone else.
The same is true for all of the whiners lobbying against the oil industry, the oil companies are a symptom of a problem, but all the ESG hedge funds and their boosters would do just as well to boycott Apple, Amazon, Walmart, etc since they are even a bigger source of problems than oil companies.
Actually while China does have much coal mining. Although much is very low grade and not cost effective. Many mines have been run at a loss to protect jobs. They have to import almost all coking coal. Ditto higher BTU content coal as many processes, including power gen, use coal having burning equipment optimized to a narrow range of BTU content.
It’s only partly “shortage” (because “we don’t like Australia anymore”?), the other part is “demand restrictions to meet CO2 targets because global warming”.
It’s a strange, strange world now.
All commodities have been priced below production cost for a decade by futures markets that don’t trade the underlying commodity. Combined with hefty EPA requirements placed on mining companies and drillers as well as fossil fuel fired plants, these low prices and high costs have destroyed the energy industry worldwide. You cannot have cheap energy and high regulatory costs. There is not a coal company in America that did not go bankrupt in the last decade – some twice. Over 200 coal fired power plants demolished too. Now we need them more than ever. Sleep in the bed you make.
@WS
I am waiting for Greta to start lecturing the west on the consequences of consumerism.
And to think Germany abandoned all of its dirty nukes for clean natural gas during the last decade. I know, I know, one is for heating, the other is for electricity. But the irony is still…. Ironic.
Apparently, China has a spat going on with Australia, formerly China’s largest supplier of imported coal. Time to kiss and make up.
The advantage of not going to Australia is that there are other sources of coal…. unless the capitalists band together and all refuse to sell coal to China, the shortage is likely not a long term problem.
Now, the other problem is oil, but what’s the US going to do, sanction every Chinese entity ignoring the Iran sanctions and try to starve out Iran? This would lead to massive dislocations in the long run everywhere.
This is something China is already doing any how, so, very little risk there.
Australian coal is being excluded by the CCP because of Australia’s call for a Covid origin investigation? Really, those who attribute competence to the CCP have lots of explaining to do.
@k
I couldn’t figure this either until I heard the wonderful Christie Iy on RT’s ‘BOOM BUST’.
Here’s the score. In China coal is free market spot price. The battle with Aus has put pressure on supply but a bigger factor is the effect of Covid, floods, etc on home production. Because of market price it’s become very expensive.
Here’s the rub, the electricity price in China is controlled and the generators can’t make money at the current coal price so they are shutting down plant until the Govt agrees a higher price cap or subsidises coal. The gas plants are beginning to have the same problem because Europe is pushing up the price of gas also due to failures of green energy.
Sitting behind the scenes is King Vlad who would like Germany to dump the EU(US) and sign off on Nordstream 2 which is complete and Gazprom is dangling millions of btu’s under Germany’s nose for the winter.
Germany just voted over 10% for Greens who promised to let the new pipe rust in the water but Merkel is still in charge untill a new Govt is formed. If they don’t sign Vlad will help his pals in China and Eurasia and I’ll still get my Gazprom dividends. Don’t fancy UK’s chances after we sent a destroyer to the Black Sea to show how tough we are.
Every body could be snug and warm everywhere if the Engineers could just get rid of all these pesky politicians.
Peak Oil kam. It’s a real thing. It’s what is driving EVERYTHING! And this is not a drill.
In the supposed supply chain shortages I believe that hoarding is a part of the game now. Anyone who has a product, or part of a product, that can get them a higher return next week, or next month, why would they not hold it down for a bit?
The Chinese authoritarians may have figured it out that they can directly contribute to the growing US inflation.
So, under the ruse of energy shortage they can cause further jacking up of prices and I suspect this maybe just the beginning of their scam for the US holiday season..
This Chinese energy shortage is a result of several CCP caused problems.
The effort to punish Australia by blocking many imports such as coal. It’s also worth noting that there are different varieties of coal, Australian coal is among the best and least polluting. Coal plants, like oil refineries, can be heavily equipped towards using only certain types of coal. Chinese coal is much more polluting, and is also incompatible with many Chinese coal plants.
The floods that happened in China, because of CCP designed infrastructure, effected Chinese coal mining.
The CCP caused pandemic, effected supply chains in countless ways and across the world. Electricty consumption is subsidized in China, and because of inflation and the costs of the pandemic, and it’s responses in China, many governments don’t want to or can’t support paying for enough electricity subidies to meet demand.
And much more.
In response to dealing with this and countless other types of CCP nonsense, more foreign companies will end up leaving China. The mental gymnastics you China shills use to cover for the CCP, is truly amazing.
Excellent comment. 👍👍
Great comment.
Metallurgical coal from Australia is used for making steel.
Brown, dirty coal (of the Chinese domestic variety) is used in their electric plants.
Apparently their coal production&delivery issues are greater than they are letting on, because now there are widespread blackouts in the northeast in addition to the industrial cutbacks.
The propaganda says “Meanwhile, dozens of provinces across the country are also facing power curb due to govt’s pursuit to cut carbon emission even though the supply for coal remain adequate.”
Under the rules of propaganda, I believe this translates to a real-world situation of:
“China is short on coal due to trade wars, flooding and other (COVID-response-driven?) production/delivery issues, and we can’t make enough electricity. So although we’ve never worried about CO2 outputs before, we’re using this as an opportunity to
‘cut carbon emissions’ because we can’t supply what we’d normally use anyway.”
There’s no shortage of coal in the world, or natural gas, but there’s a considerable shortage of common sense, particularly after this long period of prosperity – today’s leaders don’t have a good sense of the realities of production and delivery logistics needed to keep a modern technological nation running.
“CCP nonsense”
This may be true, but, references please?
South China Morning Post is one of many sources that has covered the power issues since China started blocking Australian coal. There has been blackouts and other issues since later last year. Many Australian ships full of coal were stuck off the coast of China for months waiting to be cleared, before many started leaving. Some, mainly small ones, may have gotten in. Exact numbers I can’t find.
https://www.scmp.com/economy/article/3133225/china-australia-relations-coal-shipments-continue-remain-stuck-chinese
https://www.scmp.com/business/commodities/article/3111202/much-us500-million-australian-coal-sit-ships-chinas-coast-spat
There has been many articles on it, dating to last year. Most are mostly paywalled, unfortunately.
Yes, the SCMP is generally understood to have the same attitudes towards the Chinese government as any US based rag.
Do I trust the official Chinese publications? Hardly. That’s the problem for people on the outside trying to peer through the propaganda.
People here obviously have very strong negative feelings towards the Chinese government and tell us we’re supposed to hate and fear the Chinese. But I can never remember why.
It’s pretty hard to fake dozens of large ships being off the coast. Also large ships are tracked by services such as MarineTraffic.
Mindless shills and Wumao like you have to ignore objective reality. You have truly earned your name.
@TT
Check out Christie Ai on RT’s ‘BOOM BUST’ she’ll tell you all you need to know about China. There are loads of great reporters there who are all non-MSM BS. All the guys that you don’t get on MSM are there.
Sorry TR, didn’t see your comments on coal quality till I scrolled down further. You were right on.
Great comment and I hope you are right and most of the manufacturing gets outta there.
“The Chinese authoritarians may have figured it out…”
They’ve known all along that the US and its companies have become reliant and dependent on the Chinese. Now the Chinese twist the knife….
This indeed seems like a “ruse” to use your word….all at once with no real good explanation as to why…
But luckily, it is “transitory”, right J Powell?
Xi sees weakness in Biden…Xi also wants to leave his “mark” …and he isnt getting any younger. Same goes for Putin. These two are dangerous and want to end up in the history books. IMO.
XI will be treated same way Stalin have been treated in the mainstream narrative of “ the China story “,
There is Not much patience left in the “ patience tank of the politburo to carry him to a legend status that Mao is held”!
A “ grand strategist”, he is NOT.
The continued failures and self immolation that the leadership under his command have performed is NOW (right on the nose) for the rest of more moderate, yet long term thinkers in the high cadré.
It is only a matter of time before “ this fool” gets swiped aside, as the Chinese Economy slowly grind to a stagnation status.
The much reported $300 billion dollars in Chinese property defaults are but a tip of the iceberg, as some more accurate figures tally this figure to be between 3-5 Trillion dollars !
If the supporting industry sectors ( to the construction and property industry) are calculated these figures might be even moderate.
On of the main reason that the Chinese are finding it hard to squirm out of the hole they dug themselves into has been the overconfidence in the ability of China to market it’s narrative of the geopolitical crisis in verity of theaters , the South China Sea, east Asia, Central Asia ( including Afghanistan and some failed foray in the Middle East as well as The African continent.
The backlash to China’s policies have increased dramatically since the ( FAKE PANDEMIC) , Europe is really wary of the continued Chinese threats to its economic recovery and long term viability as a sold economic bloc.
There has been many tectonic shifts in politics that the world have experienced in the last 18 months, that played out against China, something that the US under the current circumstances have Not been able to capitalize on.
This has been largely due to lack of leadership and a very mucked up strategic planning.( here you should read all of Historicus’s comments regarding “we’ Ruled by morons ‘)🤣🥴
There is still very real danger that, should a change in the Chinese leadership direction doesn’t happen in the next 12 month , the world might plunge into an even bigger crisis than the one we are in now.
Hoarding may be, going on. I am not sure that the CCP gangsters are smart enough to use it because of their current impulsive, hapless leader.
More evidence for the dumb cattle stampede theory of economics: they are now BUYING Evergrande stock today because they misunderstood what the CCP said! LOL. Foreign investors are NOT consumers of housing in China, so they will NOT get bailed out!
Reportedly, internally, the CCP is telling its members to prepare for Evergrande’s demise.
I like your theory most. I have felt the same way ever since the last administration started bashing China. Like it or not we depend on China. We outsourced production of nearly everything. Now we are a little at their mercy. I feel we consume to much stuff anyway and we could use a dose of reality. Maybe then we would mend a hole in ur pocket instead of replacing the trousers.
Meanwhile, in the United States:
“Bitcoin mining company buys Pennsylvania power plant to meet electricity needs”
“A holding company in Pennsylvania recently purchased the financially challenged Scrubgrass power plant. The plant currently produces enough power for 1,800 Bitcoin miners, with output increases planned to support more than 20,000 miners by 2022.”
“…the plant will burn Pennsylvania’s waste coal to power on-site mining hardware located in shipping containers next to the plant. Waste coal is the residual material left over following coal mining operations; it can be particularly harmful to the environment by leaching metals such as aluminum, iron, and manganese into the soil and surrounding water sources.”
“A single Bitcoin transaction, including the resources needed to mine the coin and to verify the transaction, can total upwards of 1,700 kilowatt hours (kWh).”
It would be interesting to know how much a single coin/paper cash transaction takes. Or a typical electronic money transaction.
According to Digiconomist, Bitcoin uses about 32 terawatts of energy every year, enough to power about three million U.S. households.
There are about 130 million households in the US.
I think you might have some outdated data. Research from the University of Cambrdige reaches a number of 121 terawatthour (TWh) a year (note that a terawatt (TW) is not a measure of energy, is it is a measure of power). That is more than the Netherlands uses in electricity, which houses almost 18 million people these days.
See https://www.bbc.com/news/technology-56012952
There is a recent NYT article “Going for Broke in Cryptoland”
Author paid $7 + $300 in banking fees to the online company and created his personal coin aptly named IdiotCoin.
Despite all the disclaimers and warnings which he posted – soon he started receiving inquiries from prospective investors “Should we buy it ???”
Well,present investment climate is absolutely brutal ☺
Meanwhile,Wall Street trading algos are processing Mr.Richter latest post about production stoppages and placing huge BUY orders…
And markets will yet again soar tomorrow as they should…
At some point in time investors will find out that companies need to be making money even in a recession to not get wiped out.
Yes. The U.S. government’s fiscal response stemmed the bleeding on a lot of companies like Macy’s and others that made money as their customers were handed trillions to spend. Let’s see how long that lasts.
“…companies need to be making money” –
Isn’t that what the bitcoin miners doing – making bitcoins – are bitcoins “money”?
Aren’t bitcoins the same “money” that the Fed makes without using near as much energy?
It’s all smoke and mirrors and China is tired of the smoke part. It’s the burning “khowdung” that stinks…
Nah,looks like that “some point” will never happen…
“The falling leaves drift by my window
The falling leaves of red and gold
I see your lips the summer kisses
The sunburned hands I used to hold”
While burning falling leaves in your backyard dont forget to throw in your well-worn copy of “The Intelligent Investor” by Benjamin Graham 😀
Sounds like an ideal example for regulatory problems and environmental groups to boycott
No one should be surprised by this. It is the long predicted decline in industrial output we were first alerted too back in the 1970’s. What is surprising is the stunning accuracy of the predictions in the “ Limits to Growth” model. The graphs made back in the mid 70’s show the growth in industrial output rolling over and starting a long downhill slope at the year 2020.
Don’t know about that. There are things that need to be industrially produced if the country wasn’t so debt saturated. We need more efficiently produced homes for one. If you believe ‘experts’ we need to electrify the economy which is going to be a whole new industrialization.
They have a fancy word for it, but it doesn’t improve standard of living in traditional meaning but prevents future negative affects. Probably will work it’s way into GDP somehow.
Agreed. Anyone reading Gail’s blog “our finite world” will see this discussed many times by the author and commentors.
Amazing. I wouldn’t have thought that most of these were power gluttons, i.e., assembly plants. Bitcoin, sure. Does this mean that aluminum, the big pig, is shut down?
PS: you can’t power an AL plant with a standby generator.
Oh oh. Maybe politics is part of who gets cut.
‘On Sunday, Taiwanese companies with manufacturing operations in China disclosed in filings with the Taiwan stock exchange, cited by the Nikkei Asia, that they have to halt operations at some of their plants in China’:
More reason to move to somewhere else out of China.
The reasons to leave continue to pile up
Wolf, I believe this flight of industry and capital from China is a real thing. You should do an article about this.
Change is sloooooowwww…energy costs are high everywhere and will continue to rise…
Coming back stateside to sell to North America market is a good idea, but where is the growth worldwide? Unless you have a product for our market, stay in the Far East.
Look at the number of container ships that are waiting in line to unload their containers at West Coast ports. It is time for companies to come back to the US if they wish to sell their goods in the US. Taiwan Semiconductor is building a large plant in the US. Others will inevitably follow.
@Rcohn
Re shoring is a very complex series of operations – the example you use is of a foreign company had it’s both arms and all legs twisted and besides is not reshoring – their boss did’nt like it one bit, plus there are numerous problems with the site allocated in Arizona, first up water supply, which has cut output in Tawian as well
DoD has been calling for reshoring for a very long time, with very little success- look at any website that deals with this – DoD is looking, if all goes well, at regaining some self suffiency re shoring supply chains by 2040
This below gives you some idea of the complexity – not to mention the lack of will and the lack of skill of the Administration on down
https://www.areadevelopment.com/Automotive/q3-2021-auto-aero-site-guide/challenges-facing-the-auto-industry-post-pandemic.shtml
Read Matt Stoller on pharma re shoring to see how this has just made the shortages worse and the price hikes higher
Either which way, you lose
Absent a drop-dead-urgent crisis, re-shoring will be done slowly and bureaucratically. But it’s far more likely that necessity will be the mother of (re-)invention. Best to be prepared.
Having moved our production facilities overseas I can say that they are unlikely to ever come back. Every item manufactured has a labor cost. The US labor cost is grossly inflated because 1. Workers have to live somewhere and real estate costs are grossly inflated due to the finance toll road (China has this problem as well.) 2. Legal costs of employees are outrageous in the US to include worker’s comp law, medical costs in worker’s comp, associated production losses, diversity litigation, patent trolls, environmental lawsuits, product liability etc., 3. Every employee is carrying a burden of 12,000 per year health care costs that are grossly inflated 4. We are paying grossly inflated amounts for all this and we are getting a third world work force qualitatively with high drug use and absenteeism. This is why just about every company wants migrant labor for labor jobs and the advantage of the migrant labor, which is incredibly expensive when you consider total cost) is that the employer can offload the overhead on the government (meaning everyone else) since the children need to be supported. Education is a racket. Average cost per child per year is 30,000 and the results speak for themselves. And, of course the military budget which is paid for by everyone. So podiatry, chiropractic, unnecessary surgery, unnecessary litigation, draconian divorce litigation, finance costs, political graft, campaign finance, defense costs, transportation costs, education costs are all in the soup of national production costs. Unless the US legal political system changes, meaning less income for lawyers, nothing will change. We are at a permanent disadvantage. In summary, the chances of us bringing our facilities back to the US are very low.
This is why I chuckle every time I hear a politician say we’re going to bring manufacturing back to the US. Yes you could but the US where you are bringing these jobs back to will have to look completely different than today.
I think you pretty much defined US GDP. I guess output is a small portion of the total.
Taking your argument to its logical conclusion , all labor intensive manufacturing will be done off shore,the US will continually run massive trade deficits and the dollar will tube
Bingo!
Along with the new Intel plants in Arizona.
Arizona doesn’t have the water.
Arizona has plenty of water it’s just a question of putting it to better use.
Onshore semiconductor self-sufficiency is a national security issue, which makes it a higher priority.
It’s going to be a very, very cold winter (fall).
This reeks of a COVIDtastrophe cover-up.
The Party controls all the information flows in China, but the one number they can’t control or fake is export volumes of physical goods.
Things must be really bad over there right now. The latest wave is bad enough here in the US, and China still doesn’t have mRNA shots.
So yeah, instead of admitting the full extent of their desperation, they claim to have suddenly discovered environmentalism. Timing is a total coincidence, I pinkyswear.
I suppose I should admire your cynicism, it’s not a bad thing to ponder and question official accounts. But having lived in Suzhou for nearly four years and having recently moved to Shenzhen, I can assure you that things are not as you assume. Chinese culture has a long and significant connection with nature; the environment is very important to people here. Like most people, they enjoy blue skies, clean water and fresh air. The past few years have proven this.
I’ve got 6 weeks to find a plane UK-Shenzhen before Z visa runs out. Charter from France postponed again and again. No commercial seats from UK to China ( that aren’t via HK/Taipei).
It’s my understanding that world economy was saved by China rapidly expanding credit after GFC to keep total world debt going. Now that China is saturated like rest of the world and Covid damaged world economy the world is in a dangerous place.
Yes, things in China are so bad that there is still a huge shortage of ships and containers while ships wait to unload at US ports, as Mr Richter is often telling us.
I guess the latest thinking is China screwed itself by letting real estate get to 30% of GDP much bigger than USA and Japan real estate bubble ever got. We will see if they can soft land the plane, but very rare to softland a debt bubble
Interesting…. It’s still a year until the Olympics, I wonder if the reduction is an effort to have blue skies again during those events.
I do recall hearing about the fact that China has approved a significant amount of coal fired power plants for this year…. That’s in addition to the large number of nukes coming on line over time. As well as all other sources.
There is a significant rise in energy demand over the last decade, and China is going to keep on importing resources of all types to sustain those requirements. Everything from uranium to coal… to think at one point China was actually exporting coal, but I think that hasn’t happened for a long time now.
They are truly in an all in approach in terms of energy consumption, and I for one would like to see Greta lecture Xi…. It would be hilarious.
No, it’s definitely not for the Olympics, it’s too far away, for this to matter right now. If the the Olympics do indeed happen in China, they will shut down all the factories in the area, and force residents to use less power and pollute less upto a couple of weeks in advance, and during Olympics. This happens during many “celebrations”, whether they be military parades, “celebrating the CCP events”, or otherwise. This probably, would only happen in that province as well.
China tries to push up GDP by Subsidizing construction of industrial facilities, often far beyond what demand could utilize. This is why they are building so many coal plants. Coal plants qualify for alot of subsidies (depends on area), if you can build a plant with subsidies and a government approved loan, even if the plant never switches on, you can likely pocket some money and walk away from the project. When you consider how incredibly corrupt the CCP is, this stuff makes sense and is incredibly rampant. Alot of these projects, which were never intent on actually being used (or being used to stated capacity), are unusable or not capable of their stated capacity.
Why is this not front page news? QQQ down 0.8% ? Almost looks like media did not get informed of this.
Winter Olympics in China starts in a little over 4 months. Many cities in China have acute pollution problems during the winter months.
Less coal used for energy production , less pollution.
Yeah, and less demand for mass produced consumer products, less pollution.
China is the biggest contributor of CO2, but they aren’t the root cause. Just look at their across the board increase in energy mix, you get the idea that they are struggling to catch up to energy demand.
I think idling their plants to balance out their energy consumption is probably not a bad idea, but you will note they are doing it in a way that isn’t going to kill their own economy. More than anyone else, they know what it means to walk on a knife’s edge.
Rcohn,
China is trying to punish Australia by blocking coal imports. Coal quality varies around the world. Chinese coal, through no fault of anyone, is lesser quality and pollutes more. Even with energy shortages, the pollution will probably be worse than usual.
@MCH
Not only all you say, but Iran is also joining the SCO, so that means they can get all the oil they need via pipeline so their tankers would no longer need to run the gauntlet of your South Pacific fleet which was their major vulnerability. These Aussie subs might just be MSM BS fodder.
They’ve also got old Vlad and Sergei Lavrov for everything else they need. Hard to resist as an investment target when the dust settles in a couple of years.
An economic collapse will be such a blessing. All this “growth” is killing us. Do we really need a new iPhone every 2 years?
The solution to shortages is simple: less demand.
Not to mention the lost jobs. It’d be better for Americans for people to buy $500 microwaves that would last 30 years and be repaired by their fellow citizens than to buy $100 ones that last 2 years before crapping the bed.
We used to have electronics repair shops, where you could bring TVs, microwaves, and other small appliances to be fixed.
Yes. Best comment I have read in a long time. I was talking to a local repair shop owner last year when I bought a stackable washer and dryer for a rental. He said there is only one other repair shop on Vancouver Island, (around 900K population) and that the ability to repair appliances is being lost as no young folks going into it.
I don’t think it is worth repairing electronics, but under performing appliances relying on electronics need to be replaced.
Anyway, the washer works great and I replaced a digital top loader piece of junk with this 30 year old gem. He said he can’t keep them in stock. (It wasn’t cheap, though…..but less than new)
Thanks Paulo. Yeah, it’s definitely not worth repairing electronics, but that’s only because Chinese imports have made it such that the value is way below the value of anyone’s labor. It didn’t, and doesn’t, have to be that way.
It’s also much better for a society where people are capable of doing things. People don’t go into repair like you mentioned because there’s no money in it. But that also means that if we get into another world war, who is going to be around to repair weapons systems and other things?
The last 60 years has made the West complacent.
just repaired my electric dryer. Total cost $50. Versus a new one. No repair shops around.
Agree with Paulo…. There are too many forces against repairs, the lack of skilled or even educated workers is one problem, the corporations are another (looking at you, Tim Cook and Laurene Jobs… since it might be a bit hard to look at Steve right now), and in the mirror if we are honest.
Think about it, the only keeping us from repairs is how difficult it is to find a source for it, and this is aided and abetted by our corporations.
@RNYer
Time didn’t make us complacent, easy living did.
My washer broke 3 months back after serving me for 14 years
The cost to repair was 700 but new one costed me 650.
RightNYer – I agree with your observations on losing our ability to repair things, as a society. But the reason is not as simple as young people not learning how to repair things, or that the items made in China are “too cheap to repair”.
Planned obselence is a fine art these days, and is practiced by pretty much every corporation out there. These companies make it as difficult as possible to repair their products by the design they use and having their suppliers sign agreements forbidding them to supply parts to anyone else but them. To top it off they then lobby government to try to make it illegal for anybody else but them repair their product, due to safety and security reasons of course. See Apple and John Deeres efforts on lobbying.
There is a right to repair movement emerging to counteract corporate planned obselence. It is being led by Gen Zers, see Louis Rossmans work on this front.
As my father used to say, “a man who can work with their hands will never go hungry”.
“Planned obselence is a fine art these days”
Microsoft and Apple learned how to do this from GM and Ford.
(there is nothing new under the sun)
When you need to cut open appliances that are fastened with robotic spot welds to replace a part instead of old fixable gear with screws or bolts, you have a piece of junk after.
Trailer Trash – it might not be a new concept, but it is being pushed further than GM or Ford ever dreamed.
There are laws that require auto manufacturers to allow, and support, third party repair of their vehicles. They might do this begrudgingly, but you can walk into any autozone and buy perfect fit third party alternator, starter, etc. for your car.
Outside of the automotive sector these laws don’t exist. John Deere do not allow or support third party manufacturing of any of their parts. They tightly control the parts pipeline these days by embedding chips in each part allowing only a John Deere part installed by their technician to work in the tractor. Even if you have the part and install it yourself it will not work. GM and Ford never got away with this.
Young people want to fix things just as much as older generations do and did. They just can’t as easily because the game is rigged against them. Back in the day your TV came with a circuit diagram in an envelope inside the back panel, they even gave you tips on how to troubleshoot. Today’s kids are being given gadgets with soldered on CPUs, soldered memory and circuit diagrams that are considered trade secrets that either have to be reverse engineered or smuggled out of the factory (both occur).
It will change though, many of Gen Z are not happy about it and are changing things.
The right to repair is covered by “laws”…. but, as many manufacturers have done, the access to the manuals to do such repairs is cost prohibitive for the DIY’er and small shops. $35 a day for access or hundreds of dollars per month is not affordable for a guy who might repair one BrandX vehicle per month. The “laws” were written to favor the manufacturers by the automobile industry lobbyists, not the lawmakers nor the customers who “own” the products.
John Deere didn’t invent the module blocking. In the case of BMW, the simple task of replacing a spent battery requires the battery be “registered” to the car so the car doesn’t burn either the battery or the alternator (or both) out as the electronics remembers the old battery charging status and will overcharge the new battery. Even my 18 year old BMW requires the body module to be programed to the car if you install a new one or attempt to move a module from one car to another of the same model/vintage. Otherwise, many of the features like power windows, etc., won’t work.
El Katz – interesting, I have changed many car batteries over the years and never knew that about BMWs! I know modern cars can be tricky when it comes to boosting. When I see people stranded I parking lots who need a boost I am always tempted to help, but if it’s a newer model I am petrified I would just fry some electronic components.
John Deere didn’t invent module blocking, but they are trying their best to perfect monopolizing tractor repair and they are succeeding. I called every independent tractor repair place to work on my 7930 (2009) within 200 miles of me, everyone said there was nothing they could do as they don’t have access to the JD software. All I needed was a simple brake pressure sensor replaced, no can do without the software.
It’s true that automotive repair manuals may be expensive, but at least they are available. Busy repair places can buy them if it makes business sense. Take a look at the guys repairing laptops online, they can’t get circuit board schematics for any price. It takes an incredible amount of work to reverse engineer a circuit board so these guys can replace a dodgy resistor that caused you to lose all of your data. Samsung, Apple, Asus, you name the manufacturer, they all want you to throw that laptop in the garbage due to a 10c resistor, capacitor or simple chip failing. These guys make the automotive industry look like saints. It’s the equivalent of being forced to scrap your BMW because an oil pressure sensor failed.
That’s why I grab those old panasonic Micowaves that get tossed scrached or the like . I have some 10 years + old that work perfect
I fix stuff all the time! Pinball machines, arcade machines, music synthesizer type stuff, vintage computers. There is a decent scene of people repairing things. Lots of videos on YouTube and tips shared on forums.
A big problem is custom parts, and the short runs of parts. But people do part out electronics and sell off all the working boards where maybe one has failed or a screen got cracked. Starting to see people reproduce some parts.
As a kid, I remember the repair shops that my parents used not doing such a great job. It was hit or miss with long turn around times. And of course, authorized service centers only when it comes to parts. That is still the case, but Russians sell pirated service documents from the online systems if one needs it.
Can’t have that. CPI demands the price of stuff only goes up so much each year, so they have to make it cheaper so the banksters can print maximum cash and claim inflation is low.
That’s why it’s comical the fed says they want to save the planet. They could grind the economy down into the ground in a second if they raised interest rates high enough but unfortunately the debt based system we have requires continual growth or else it implodes. So we promote policies that encourage disposal consumption which goes against what they say they want to do.
Just read an article about how with government support to nearly everyone last year and with poverty rates reduced Congress is thinking that this a model for improving the lot of the lower class. We are in trouble.
The top 400 in the US own almost 20% of the wealth up from 2% in 1980 and up from 9% in 2011 when QE started.
If the share of wealth owned by the very wealthiest has exploded and the share owned by the very bottom has stabilized or gone up, there is only one conclusion
The share owned by the middle class has been obliterated .
If the Fed continues its policies, which benefit the wealthiest and the Federal government keeps on increasing the welfare for the poorest( reference the voting debacle happening this week in the HOUSE) , it is inevitable that a violent revolution will take place in the US. Remember US citizens own 400 million guns
You can’t shoot when you have an iPhone in one hand and a donut in the other.
@Bobber
That’s why we have all the gun laws, to make sure people who get crazy ideas like they are being ripped off don’t protest and do something with their rights.
🤪
@Bobber, the trouble start when the last donut is eaten and people go hungry. The absence of donut also leave one hand free for the gun.
assume y’all are comfortable with the depth/availability of the reloading supplies supply chain, then??? (Fuels will most likely disappear simultaneously with donuts, however…).
may we all find a better day.
I am still using my Samsung J7 cell phone, a 2015 model that I bought in 2016. I don’t do any financial business on it and am not concerned about security patches. All of the functions still work. When the original battery in it can no longer be recharged, I can buy a new battery and install it myself. It does not have to be sent back to the factory.
Hell I just replaced my 18 year old Samsung flip phone, 4th one, not because it won’t work but because Verizon is finally stopping 3G service, which I guess does mean it won’t work, but not because of the phone itself.
I miss it everyday
I bought an iPad 13 as soon as it was released this month. I traded in an iPhone 6 for an iPhone 12 in 2020. The iPhone 6 was no longer supported with updates.
While North America and Europe have been closing coal fired electric plants, Asia has been building new ones.
“no longer supported with updates”
and probably embedded software issues that will pop up down the road…forcing one to buy a new Iphone.
Planned obsolescence … created obsolescence.
Wait until people jump on the software restricted EV bandwagon. We haven’t seen anything, yet. From loyalty cards to restricted software to personal debt, it’s all about handcuffs and a captive market to harness folks up on the hamster wheel. No, I don’t believe it is one big conspiracy, but something stinks in today’s commerce.
Bingo!
And forget about going to your local car shop for simple fixes.
Paulo,
It is one big conspiracy…
It’s all about monetization…
And leveraging a product or a service or a govt required license or tax for the greatest money production…
The iPhone 6 is over 7 years old.
It still works fine for sending and receiving calls.
My wife is still using her iPhone 6 (5 years now?) and it works perfectly. She has no plans to replace it and it’s used daily with the original battery still in it.
“The iPhone 6 was no longer supported with updates.”
That’s odd…. my iPhone 6S was just updated this past week with security patches. Battery works fine now that Apple quit messing with it (think there was a class action lawsuit about that – that Apple lost).
Not buying another phone until this one blows up…. and I may replace it with a new-to-me older model.
‘ but had already prepared power generators in case it receives the notice from the city government.’
Which I suspect pollutes more(less efficient) than a central source. Oops.
Bingo!
I don’t think that the Chinese govt. is worried about polution at this point, they just don’t have enough power. I suspect that the Party is keen to avoid a collapse of the power supply by controlling demand, in the US controlling demand is called communism, so the lights just go out. California is going to be rationing water and electricity soon, or alternatively letting the “market” take care of the problem i.e. the poor die and the rich fill their swimming pools with cool clean water.
Just as an example of the electronics component shortage, I went to the web page of a major US-based electronics supplier, Mouser, and searched for an incredibly common component most likely produced in China because it’s not a highly sophisticated integrated circuit and is of a type which has been around for decades, and was blown away by the results compared to the last time I needed some electronic parts I didn’t have in stock. Prices seem to be up, too, as I recall that these used to be much cheaper.
Linear Voltage Regulators – Adjustable
On first page of 12 pages:
16 types “On Order”
10 types “In Stock”
I clicked on “View Dates” for one of the “On Order” types to check the expected date for inventory and saw 4/2022 as the earliest!
Admittedly, Low Dropout (LDO) Linear Regulators and Switching Regulator Controllers are more common in modern hardware, so this may be a case of switching overtaxed production capabilities to the more modern components.
I have got to say I am enjoying riding my gas powered low tech scooter.
Nearly everything is analog with mechanical speedometer/ odometer/ no fuel injection and air cooled. Will run with battery as can be kick started or pushed off. I suspect there is one small electrical box hidden somewhere on it, but it can not be much if it will run without battery.
Bicycles have an even simpler supply chain.
Shoes would be next down the list.
And in a pinch, bare feet don’t require any supply chain at all!
The problem with scooters and bicycles are that orthopedic surgery and hospitalization bills are higher than a simple mechanic’s fee.
That’s the main issue with the chip shortage in automobiles. They insist on use old and technically obsolete chips.
NordStream 2 should ease the Panic Pricing Pressures from DEU and AUT.
These CHN “Electricity Crackdowns” should be mitigated by Imports from RUS and IRN – probably resulting in increases in shipments/contracts/Pipelines.
CHN will overcome this, obviously – we’ll see how they handle this over the next 6 Months.
No way that the Russians will increase the current gas flow that moves through Ukraine.
Nordstream 2 requires licenses from the Germans. Earliest that this can happen is mid Jan. By the time THAT gas is flowing the winter will be largely over. If the winter is colder than normal , many Europeans will freeze and economies will go into a depression as super high natural gas prices soar even more.
Gee, there seems to be a shortage of LNG in the world. Gee, I wonder why? Gee, maybe it has something to do with someone shutting down gas exploration and pipelines in the US (a major exporter of LNG), and crippling the world’s shipping industry with worker shortages. Gee, I sure made a ton of money on my energy stocks. I guess I must have seen it coming a mile away.
He’s just warming up folks, you will not believe how bad it will get.
China has been drawing down on their SPR. With crude ( our biggest export to China) at inflated prices, (and the dollar firm), result primarily of the US futures market crash in 20, which was orchestrated by Yellen Fed policy back in 2013. Then Iran sanctions prevent China from buying alternative sources. So we finally have an efficient market in Nat Gas, (and subsidized foreign buyers compete for our NG) the admin announces the end of fossil fuels in twenty years and prices double? The immediate concern is China’s production of low end US consumer merch, take that away and Main St feels the pain.
Crude is not at inflated prices.
Not to be sarcastic, but , with examples, how bad is bad, do you think?
Keepcalmeverythingisfine,
“…someone shutting down gas exploration… in the US”
No one shut down natural gas exploration in the US. Where did you get that nonsense? Trying to abuse my site to spread some political BS?
Shale oil and gas business has been losing a ton of money over the past decade, and many companies have gone bankrupt, taking their investors to the cleaners. I’ve been reporting on this for years. So now, investors have gotten burned, and there is less investment going into the sector than there was before, and production of NG is near the peak, but just a tad shy of the peak, and so prices have risen from collapsed levels that was wreaking havoc on drillers to something that drillers can actually make money with. You’re just going to have to pay more.
The irony of this is that consumers have been buying discounted NG for years, and now we are facing deglobalization, the cost skyrockets just when industry and jobs were set to return. Low NG prices were a boost for muni government transportation, while EVs serve the motoring public. So when the corporate trash haulers go out of business, or triple your rates, you will need to load your personal garbage in your EV PU and drive to the landfill yourself. Which is the way we did it when I was a kid.
I don’t think it’s discounted… NG pricing is more localized phenomenon. If magically, gas can be sent from the US to Europe via pipeline, then suddenly there wouldn’t be any difference between pricing in Europe/Asia and NA.
The pipeline idea in the US works because… well, duh… no ocean.
There is NG in the Marcellus Shale of PA, #2 gas producing state. There is associated gas in shale oil fields around the world. There are two new LNG export terminals under construction in the U.S, and one terminal expansion. Mexico has Eagle Ford natural gas it does not want to develop. The Middle East may have large supplies of unconventional oil and gas. They are currently tapping richer fields, except the Saudis are developing a nat gas shale discovery.
The thing about natural gas is that it’s just difficult as heck to transport the stuff… or expensive at least.
Otherwise I think there would be a lot of people taking advantage of the arbitrage opportunity between the pricing dislocation in Eurasia vs NA.
Exactly, it’s the preparation for transport out of the country that’s so expensive. Prior to that, natural gas has to be pipelined from gathering and cleaned up (mostly removing water). Then it has to be liquefied and put into a dedicated vessel for transport. On the receiving end, it has to be unloaded (as a liquid) and then re-gassified. All this takes a lot of very expensive equipment dedicated to only that service.
What this drives home is that EV’s and all the components that go in to them are built with a fossil fuel powered supply chain. Our ability to make them in mass will only exist for as long as the various forms of dinosaur juice hold out and are cheap enough. After that it is back to handmade bikes, horses and shoe leather.
Go long Amish?
Many parts of the West are in a severe drought . If this drought continues , then there will be no choice but to reduce production of hydroelectric power. With demand for electricity increasing because of EVs, where will increased production come from over the next 2 years?
CA may not face the electricity debacle that TX experienced last winter, but frequent blackouts will become the norm
If only we could find a way to use the Sun to power our electric cars.
If only unicorns shat out rainbows all the time.
The electricity production from hydropower in the west is already down. I saw some graphs yesterday showing overall hydro power production down 15% in the Pacific Northwest and significantly more than that in California due to drought conditions. Not sure how much longer we ( the PNW) will be able to continue sending electricity to Southern California via the big DC transmission line.
Seneca’s Cliff,
EVs shift energy consumption from crude oil to natural gas, nuclear, renewables, etc.
But EVs are also more energy efficient to drive than ICE vehicles for a number of reasons, and thereby use less energy to drive and ICE vehicles. The primary reasons are: one, the thermal efficiency of electric motors (around 90%) v. ICE (between 0% at idling to maybe 30% cruising at a steady highway speed, with the rest being waste heat); and two, due to the EV’s regenerative braking that captures the energy produced by slowing the car (heat on your disk brakes on an ICE vehicle) by braking with the electric motors that then generate electricity and charge up the battery. A 300 hp electric motor can generate a lot of electricity and brake the car sharply. That’s why EVs use so little energy in stop-and-go urban traffic.
Wolf, you are correct that EV’s are more efficient users of Energy than Ice vehicles, but the difference is not as great as you might think if you analyze each step in the process. To make things simple we will start with the same amount of energy (1000 btus) for either vehicle. To make the math simple lets assume the ICE vehicle is burning the same natural gas as is being fed in to the combined cycle power plant. The Ice vehicle is simple, at 30% efficiency for the best and most modern Ice engine gives us 300 btus of energy to move the car down the road. With the EV we feed the same 1000 BTU’s of natural gas in to the combined cycle power plant at 60 % efficiency giving us 600 btu’s of energy to dump in to the transmission grid. But on average distribution and transmission losses can average about 10% giving us 540 btus to the front of the EV charger. According to Tesla’s own information you lose another 13% to a combination of charging and battery losses ( heat loss, conversionf from ac to dc, juice used to keep battery warm, and heat loss in battery.) This give you 469 btu’s to be fed in to the cars motor and move you down the road. But wait, the electric motors in the EV are about 90 percent efficient so you really only have 422 btu’s of energy to take you down the road. The regenerative braking also helps the EV but that number is very hard to calculate so we will just keep that in mind. Thus the ICE vehicle gets 300 btu’s of power from the 1000 btu’s of natural gas chemical energy and the EV gets 422 btu’s of power from the same volume of natural gas. Better for sure, but not as great as many think.
Also have to amortize the BTUs used to produce the vehicle over the life of the vehicle.
The irony is if we go green in a hurry the world actually gets less green for a decade or so as we make the investment in mining and construction of green infrastructure. But doing it in a hurry is a pipe dream.
It’s a fifty year project. The sensible way is to replace fossil fuels as existing capital wears out. We will get around to it when we have to start making tough choices because of money printing destroyed living standards by fooling people there is a free lunch.
“And this comes at the worst time, just before the holiday shopping season, amid blistering demand from the most grotesquely overstimulated economy ever in the US.”
Well, this is good therapy for the consumption lemmings.
This should propel the Dow to massive all time highs or pull the rug out from under it. Step up to machine and place your bets America on which way we go! We are a booming! Shortages and inflation is the new fundamentals. Extend and Pretend was just too hard to explain. But shortages and inflation is in front of your nose. Good job Congress! And congrats to the Fed. Not since curious George hung a medal on another George for missing Sept 11 has such non-performance been earned and must be praised. Good job Brownie!
On the plus side, both Kaplan and Rosengren are leaving… I guess we’ll see if their replacements are any less corrupt.
I tell you, at the end of the day, the J team member who was there after the new administration took over is on a clock. At some point, he is either going to step down, or face some kind of inquiry for the decision to allow the Fed to buy munis given his considerable conflict of interest.
Call me cynical, sure, blind trust… the concept itself is utterly laughable. It provides a veneer of non-corruptness, but that’s all. I can serve without bias in government, cause I put all my assets in a blind trust, or my husband is controlling all of our money, and he and I don’t talk about that ever…. not for the last 30 years. Certainly not while I was speaker of the house.
New mug motto: Maybe sometimes things DO go to heck in a straight line.
The timing of China’s crackdowns on certain industries and activities is rather perplexing. The leadership has to see the general weakness in the global economy already sprouting, so why would they put a further hurt on global economic growth, not to mention their own growth? Are they flexing their not-insignificant economic muscle to show the rest of the world the non-military power they possess so that the U.S. and other nations will drop some of the economic and financial pressures they are putting on China??
Could the Leadership of China sense that they are the engineers of a runaway debt, pollution, and financial/ economic system train that won’t be able to manage the 90 degree curve in the tracks ahead???!!
This could be the perfect storm for China, and create civil unrest the leadership does not anticipate, at least in degree. The military comes from civilian families; bayonetting your kin is not something any soldier will do without reservations. Granted, reducing energy consumption of much-higher-in price coal and LNG will reduce the inflationary impacts already baked in the cake, but their production cessations is also going to pinch a lot of Chinese workers paychecks. In the hundreds of thousands, if not millions.
Add in the severe funding problems blossoming in the Chinese real estate development industries, Evergrande is at the head of the class, and turmoil in China’s economy is pretty much well in play.
It is hard not to look at what is happening in China, the world’s second largest economy, and forecast that the next global heart-stopping crisis will have a Chinese ring to it. Would say the odds are some 65% that China will provide the pin that pricks the global financial system bubble. There is so much industrial pollution in China today, that these targeted plant closures to Go Sino-Green are much too little, way too late to have any real impact on overall Chinese pollution levels. Interesting times we live in.
A good read on Financial Post: ‘Evergrande and the end of China’s Build Build Build model.’ Lots of ads but no paywall.
A few tidbits: The move from rural to urban China is the largest and fastest migration in history. This set off the largest real estate building boom in history, contributing at least a third of the GDP. This has now vastly overshot, with enough empty units to house 90 million people.
There seems to be a narrative that this is just an Evergrande problem. The FP makes the point that the entire sector is seizing up. The land sales by local govt to developers (the main source of land) in first half Sept are down 90% year over year. In addition to EGs dollar bonds, the rest of the sector has issued many.
The RE sector is so overbuilt it can’t have a soft landing. This reduces estimates for GDP growth to 4% near term or 1 % in later years as a result of flat pop growth. This must effect world GDP since Chinese credit impulse ( eg. importing Oz iron ore for building rebar) has been responsible for 28 % of world GDP growth since 2008, double the US.
Perfect storm for China, with spillover to the rest of the world. Question is, where is civil unrest not antipiciated created?
There will be circus for the masses, but with no bread the turmoil will start. Now, who will be last man standing? Interesting times for sure.
Do you realize you’ve offered nothing as you post that? Ironic.
There is a world of difference between the two.
“Foxconn’s plant in Zhengzhou, employing about 350,000 workers, ”
That just passes belief. It cannot be stable. Or maybe the 500,000 soldier armies and battles of history are true although I never believed the numbers.
Those logistics cannot be stable over any reasonable period of time.
The scary conclusion is that we will all soon be in an army.
General Motors employed over 550,000 employees in 1955.
But not at one plant, like Foxconn.
That place must be enormous and a real challenge to run. I was a Plant Manager at a manufacturing plant that had 1,200 workers running three shifts around the clock and it was a chore to keep everything running smoothly. But I had three unions in the plant, too.
I’ve driven by the former Buick City plant in Flint with a relative that used to work there. Back in the day they had 30,000 employees. I can’t even imagine how many people it took just to do payroll every week.
I’ve been to the plant in Longhua a few times, they “only” had 250,000 workers when I was there. It’s a massive area with many buildings building tons of products for many different companies. It was fairly well run, although I would say, I most definitely would not want to work or live there and you are right, we may be reduced to that eventually.
In 2020, China built 184 coal-fired electrical generating plants in country, and a lot more world wide. That’s one plant every other day inside China. 20 nuclear plants are under construction. Because of the dispute with Australia, thousands of closed coal mines were reopened. China is a rapidly growing manufacturing country with 1.5 billion people. They need a lot of electricity. They will do what is good for China, not what Greta wants. BTW, the air quality is noticeably improved every year since the cleanup was announced. And the residents of China’s cities now live longer than Americans.
Greta: “how dare you”. Evil stares
They smile & promise the greenies they will do better in 2030..2040…maybe 21 something. They all cheer & go back to bashing
America & demanding we go back to cave living.
The only reason there is a slowdown is to continue driving the inflation
dagger. But hey, claim its for pollution control…they will lap that up.
“They all cheer & go back to bashing America”
The USA has been the first economic power (by a long shot) of the world for decades. They’ve developed said economic power on the backs of non-renewable energy for yet many more decades. So damn right, we should be pointing fingers at them and demand more.
Or, does the same logic with nuclear weapons apply here? USA can build more but “non-friendly” nations shouldn’t?
I really don’t care who the finger pointer is.
Were do these corporations, countries, and people turn to for production? They turn to countries with cheap power.
China is not the only country cranking out new coal plants.
Nuclear weapons?? Hell, we are living through the consequences offshoring “research”. Nuclear weapons are way down on my list of worries.
Life expectancy 2020: China 76.96 US 78.54.
As with any stat about this there is variation by source up to half a percent. No one has China higher or equal to US.
Interesting you qualify with ‘in cities’. Does this mean that Chinese designated ‘rural’ don’t get equal medical care?
Re: a new coal plant every 2 days. Is this announced as something to be proud of? It actually underscores that China’s oft repeated claim to be improving its contribution to green houses gases is complete BS, in the best retro-Communist tradition of the Big Lie.
You didn’t read my post. I said the people in China’s cities live longer than Americans. The whole country. I did not compare all of China to all of America. Many American states have life expectancies likke Third World countries.
China’s rural areas a lagging far behind the cities. Just like in America. In the US, if you live in the country, you die sooner than the people in the cities, You are more likely to be obese, a smoker, and have diabetes. This is just a fact. It follows the old rule that people with higher incomes and more education live longer. Google “whitehall study”.
I did read it. You either didn’t read my reply or can’t follow the math of ‘average’.
Overall US expectancy is better than China’s. You agree saying you are not comparing all of US to all of China. Then you say many US states have expectancy of third world countries. Absurd, but let’s say true for now. If true, then people in US cities would have to live MUCH longer than Chinese in cities. How else would overall US exceed overall Chinese expectancy if their country cousins are dying way before 60, as in the third world?
People living in rural US are not ‘designated rural’. They can go anywhere they like. Serious cases are moved to urban hospitals. This has been in the news lately as for the first time many of the central urban hospitals can’t take the overflow from the small 12-20 bed rural ones. But pre-covid, the serious cases were moved.
Smoking: the Chinese smoke more than 3 times the US: 74 % of males vs 20% US. China consumes one third of cigarettes in the world.
Nick-another info point-the ‘small, 12-20 bed rural’ hospitals aren’t ‘overflowing’ as much as they’re vanishing/vanished-they just can’t scale to even a break-even level, anymore. The result, like in olden U.S, days, is that the majority of hospitals are now in urban areas…
may we all find a better day.
Is that 20 nuclear plants (sites) or reactors? That would sound extreme as is 184 coal-fired plants.
At any rate, your first-hand information is compulsory reading about China.
20 nuclear powered electrical generating plants.
An inconvenient truth
This is a price cap issue because input costs have blown through the roof. Utilities won’t produce and lose money. Once Beijing determines who gets to eat the costs, probably industry through export fees, capacity will be restored.
A real energy crisis is occurring in the UK, especially because the government is incapable of handling basic governance. Petrol lines make the evening news, but the natural gas blowup has metastasized in agriculture (fertilizer) and meat production (CO2).
As you say ‘petrol’ I assume you are UK cit, as am I.
What is the UK govt supposed to do about the sudden increase in wholesale nat gas from offshore (Norway, Holland) and the sudden collapse of many of its domestic suppliers who are locked into retail prices by contracts and regulators. Note: I’m not disagreeing with you so far, but would like to know what ‘basic governance’ could avert this.
BTW: the UK has negligible onshore NG. Last winter in Texas, in the middle of NG fields, had its grid collapse, simply because the gas plants were not able to cope with freezing temps, a trivial engineering matter. So can we agree that the Texas govt is even more lacking in basic governance?
Thanks for re-directing the conversation back to LNG which was the thrust of Wolf’s article. I used to own stock (symbol LNG) in a company that exports LNG from the U.S. Should have kept it (doubled in 12 mo.) LNG is available from a lot of places Kuwait, Australia, Malaysia, too many suppliers which is why I sold it. Wolf doesn’t explain why its soaring.
European natural gas production is 2/3 of what it was in 2010. That’s part of the reason, presumably. I suppose that the demand side is also contributing as the U.S. was not alone in switching generation to natural gas over the last decade or more.
@Nick –
Prudent governments are aware of their risks and mitigate them before they become national crises. (I admit there are not enough of these – but more than you’d think – we don’t hear much about prudent leaders because mitigated risks don’t make headline news.)
Energy, water, food, and money/banking are essential and should never/rarely be at such risk that hoarding develops.
A good start might be avoiding “sudden collapse of many of its domestic suppliers who are locked into retail prices by contracts and regulators” :
For a nationally-essential commodity such as energy (or banking), it’s essential to distinguish between the equipment/infrastructure and the ownership/management. Management who lock themselves into poor contracts should be able to go bankrupt, but that needn’t disrupt supplies. As with banking, the energy sector needs a regulatory regime that allows for putting the infrastructure under new management overnight, with the freedom to rapidly negotiate new terms of trade, and carry on business. The essential infrastructure should continue producing regardless.
You can put in new management but if your inputs from offshore double in price the customer is going to have to pay double. So far this seems to be unpleasant news.
It sounded like things ground to a halt because certain contracts don’t allow prices to float. That results in “we can’t sell because we’d lose money” scenarios. When that scenario results in a systemic crisis, those contracts need to go, and fast.
And where might Evergrand fit into all of this?
Great news everyone! Chicago fed (Evans) doesn’t think there’s too much inflation! In fact, (according to a marketwatch article), he’s more worried that it’ll be too low in 2023 and 2024!
I am again failing to comprehend what the hell is going on in the current year. Amazing.
I view China’s recent crackdown efforts positively. What once was world capitalism has converted to grift. There are too many economic players seeking to get rich quick, with zero concept of risk or sustainability. They rely on government safety nets to bail them out. It’s about time governments wise up to this charade. Companies that don’t adhere to sustainable business models must fail or be heavily regulated. Any spot in the middle will be manipulated. After three decades of wealth concentration, it’s time to think about what’s good for the majority.
Book of Isaiah, Chapter 21, verses 5–9:
“Prepare the table, watch in the watchtower, eat, drink: arise ye princes, and prepare the shield.
For thus hath the Lord said unto me, Go set a watchman, let him declare what he seeth.
And he saw a chariot with a couple of horsemen, a chariot of asses, and a chariot of camels; and he hearkened diligently with much heed.
…And, behold, here cometh a chariot of men, with a couple of horsemen. And he answered and said, Babylon is fallen, is fallen, and all the graven images of her gods he hath broken unto the ground.”
Bob Dylan:
“There must be some way out of here,” said the joker to the thief,
“There’s too much confusion, I can’t get no relief
Businessmen, they drink my wine, plowmen dig my earth
None of them along the line know what any of it is worth.”
“No reason to get excited”, the thief, he kindly spoke, “There are many here among us who feel that life is but a joke. But you and I, we’ve been through that, and this is not our fate. So let us not talk falsely now, the hour is getting late”.
All along the watchtower, princes kept the view
While all the women came and went, barefoot servants, too.
Outside in the distance a wildcat did growl
Two riders were approaching, the wind began to howl.
* If you start the Dylan song with the last two lines it looks like Isaiah’s vision.
Apocalyptically yours,
MG
Speaking of Holy Scriptures…
“And I tell you, make Friends for yourselves by means of dishonest Wealth so that when it is gone, your co-conspirators may welcome you into the eternal Homes.”
Luke 16
“The Parable of the Dishonest Steward” or “The Parable of the Shrewd Manager.”
NOBODY – and I really mean – NOBODY in the past 2000 years was able to adequately interpret and explain this weirdest and strangest Jesus Parable.
But since Jesus sided with the crooked Steward (“Efficient” Manager who cancelled debts with gay abandon) this script is currently played out in Washington DC and elsewhere.
Jesus was a Socialist.
Its not for lack of trying! Im glad you brought this into the conversation
My two cents is that, for whatever reason, even the dishonest manager only **reduced** the debt. The dishonest wealth wasnt completely eliminated or disregarded. Funny money for funny times fo sho tho.
That quaint feeling of biblical disaster that’s in the air.
Its not for lack of trying! Im glad you brought this into the conversation
My two cents is that, for whatever reason, even the dishonest manager only **reduced** the debt. The dishonest wealth wasnt completely eliminated or disregarded. Funny money for funny times fo sho tho.
Oh no, watch out, the Bible-thumpers are coming!
Bible-thumpers,where ???
“The Devil can cite Scripture for his Purpose.
An evil Soul producing holy Witness
Is like a Villain with a smiling Cheek,
A goodly Apple rotten at the Heart.
O, what a goodly outside Falsehood hath!”
William Shakespeare, The Merchant of Venice
Should the necessity arise I can quote Qumran too 😊
As they say in non-posh areas of Cali
Yo soy Hombre multi-uso de alta Calidad
This is all the more reason to support trade with Central/South America. Get out from under China’s thumb and improve their economies so there is no reason to cross our south border.
If jobs keep leaving the good ole USA, traffic across the border might just change directions or continue to the next northern border.
If the world/USA does not wake upto the problems in keeping their manufacturing in China then not sure when they would.
But corporate greed is above all. I don’t think companies would move out of China in any meaningful way: Few reasons: May not be that easy to come out of china , cooperate greed, lack of other pastures..
If LNG prices are spiking, it would be logical to buy more pipeline gas from central Asia and Russia. Energy prices are heading higher in general. Oil is touching 80$/barrel, and it’s just the beginning of the season.
Thought China was 1st or 2nd in world Nat Gas production in 2020?
Russia 2nd or 3rd, and US in the mix. Or at least it WAS in the mix until January 2021. We’re now begging others for help while we sit on mounds of undeveloped energy.
CreditGB,
US = #1 NatGas producer in the world, but is also a huge consumer. It is a net exporter of NatGas, but other countries are larger exporters, though they produce less but also consume less (such as Russia).
Russia = #2 producer, and I think #1 exporter.
China is in 4th or 5th place.
Spoke to a friend in Southern CA this morning, who owns an aluminum and steel manufacturing business, about cost of raw materials and delivery times. Steel prices have quadrupled and they’ve been told to expect another quadruple increase in price. Aluminum prices are not far behind. Not a big deal, as these prices are passed on to end user, mostly government entities (i.e., taxpayers). However, the elephant in the room are the anticipated delivery dates, estimated to be 12 weeks and 52 weeks respectively. No materials means no production, which means no jobs. From the sounds of it, you can ditto this to many industries suffering from supply side shutdowns. Is a recession just around the bend?
58 week lead-time if you want a semi-conductor.
I think I said this before but the world seems to be running out of cheap energy.
People should think about the consequences of that happening. Bye bye suburban life!!!
It’s rare that people think for themselves. They just read the news and accept it as fact. The “question your sources” people never consider that what they are reading is controlled by a select few and most of the content, not just the ads, is paid for. Facts don’t make it truthful.
That’s why I appreciate Wolf, he finds the data and presents it with an insightful analysis, but the data is there to draw a multitude of conclusions for discussion.
Maybe it has already run out of cheap energy and we are seeing the first consequences of this.
Or is it that the dollar is worth much less than the CPI suggests?
Politicians using smoke and mirrors to hide the real or artificial shortage of energy.
I’ve always said apple should steadily increase prices, since their dedicated fans seem willing to pay just about anything. How about $2000 for an iphone? Or even $5000.
I’ve heard china is cracking down on the waste from crypto mining and manufacturing, so regular people will be able to afford electricity. It makes sense. Above all else they don’t want riots/revolutions to threaten their power.