The lights are going out at some Chinese factories.

Power shortages and related rising costs for electricity are hobbling operations at factories in China and causing some manufacturers there to shut down, exacerbating supply chain disruption for the North American promotional products market and importers from other industries that rely on Chinese producers.

Power is in shortened supply in China these days.

For promo, repercussions of the power cuts and blackouts in China are longer production times for getting products manufactured overseas and likely higher costs to produce them, according to industry executives and sourcing partners in China.

The power shortages in China are a result of diminished coal supplies, stricter environmental standards on emissions, and rampant demand from manufacturers and industry. Those and related factors have sent coal prices soaring to record highs, led authorities to curb electricity usage, compelled power plants to shut down or limit output, and ultimately gummed up the works at factories, Reuters reported.

“The power crunch has hurt production in industries across several regions of China and is dragging on the country’s economic growth outlook,” Reuters wrote. “The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.” 

China power crunch spreads, shutting factories and dimming growth outlook https://t.co/HkNDWZbMUO

— Gavin Maguire (@GavinJMaguire) September 27, 2021

Learn more about the factors driving power shortages in China in this article.

China-based production partners to North American promo product suppliers are feeling the squeeze, too. Matt Quinn, president/CEO of Hanover, PA-based supplier Quinn (asi/80228), knows that firsthand.

“The electricity issues are mainly causing production delays, which increases production times and also leads to some lost orders in cases where distributors are not planning enough lead time for orders,” said Quinn. “This is also compounded by other factors, such as COVID shutdowns in China, and shipping container delays.”

Quinn just received word from a Chinese sourcing partner company that lead time on all confirmed orders is being extended by two weeks or more as a result of the electricity-related disruption. In some cases, factories are closing rather than trying to pay for higher costs of electricity and raw materials that the power crunch and intense demand for production has ushered in.

“Some factories cannot bear the heavy cost increase and choose to close for months till the end of electricity control” by the government, the partner wrote to Quinn.

Here in Dongguan, in southeastern China, electricity shortages have been a problem for months, and that problem has suddenly worsened. Global supply chains, China's economic growth and Xmas shopping in the West are at risk. https://t.co/jhAetsTrf6

— Keith Bradsher (@KeithBradsher) September 27, 2021

Learn more about the factors influencing the power shortages in China in this New York Times article.

Furthermore, the partner stated that decreased factory production capacity and higher raw material costs, both tied to the power situation and other supply chain fiascos, will make manufacturing more expensive.

“For all new orders, the price is increasing from 5% to 20%, and is valid for three days only after the price is offered,” the partner wrote. If a Western importer needs stock for the October 2021 to April 2022 timeframe, “it’s better to arrange orders as early as possible.” The power situation in China could start to improve by March 2022, the partner said.

Quinn said all products imported from China stand to be affected by price increases and delays. With steel and aluminum reportedly among the materials hardest hit by the latest disruption, products that require such components as raw materials could rise significantly in price.  

“Our industry will survive, of course, but pricing is increasing, and these added costly setbacks will continue to force consolidation in our industry and hurt the smaller companies who don’t watch things closely and who are not prepared to adjust each day,” said Quinn, adding that his company is in a good position relative to the issues thanks to smart advanced planning and investments.

China’s power troubles are just more gasoline on the fire of ongoing global supply chain disruption that’s related to COVID-19 fallout.

In 2021, rising raw material prices, congestion at ports, insufficient labor and domestic transport capacity, skyrocketing costs for shipping containers/ocean freight, unfavorable monetary exchange rates and more have resulted in promo experiencing inventory shortfalls, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.