Power Shortages Ripple Across Industries, Sparking Economic and Food Security Concerns
SINGAPORE – China’s escalating energy crisis is disrupting global commodity markets, fuelling price surges in key materials like silicon and fertiliser while jeopardising production across major industrial sectors. From metals to food supplies, the impact of power curbs is raising alarms for economic stability and global supply chains.
Food Security Under Threat
The energy crunch has severely affected food production, a critical area for China’s 1.4 billion citizens. Soya bean processors in northern regions, including plants operated by Louis Dreyfus and Wilmar International, have been forced to halt operations. While low pork prices have softened the immediate impact on demand for soya bean meal, prolonged shutdowns could reduce China’s soya imports, disrupting US exports.
Corn processors, producing essential items like starch and syrup, are also at risk of lowered operating rates, warned brokerage Huatai Futures. Rising fertiliser prices have drawn Beijing’s attention, with state-owned firms being penalised for price hikes. These developments could pose long-term risks to agricultural output and food security.
Aluminium and Steel Take a Hit
China’s role as the world’s largest consumer of base metals has made the power crisis especially damaging. Aluminium production has been hit hardest, with nearly 3 million tonnes of smelting capacity halted, pushing prices to their highest levels since 2008. Further winter power rationing is expected to intensify these pressures.
Steel production, another major target in China’s emissions reduction campaign, has also suffered. Over 80 domestic mills suspended operations in September, halving iron ore prices from their May peak. Nickel prices briefly surged to a seven-year high before concerns over declining stainless steel consumption clouded the outlook.
Silicon Prices Soar
Minor commodity markets have seen dramatic shifts, with silicon prices quadrupling this year, reaching record highs. This spike threatens aluminium manufacturers reliant on silicon for specialised alloys and could increase costs for polysilicon, essential to the solar industry.
A Global Ripple Effect
China’s energy crisis is reshaping commodity markets, creating challenges for industries worldwide. With power shortages expected to persist into winter, the broader implications for global supply chains, food security, and renewable energy production remain significant.
