More on China’s Coal Crunch. Olympic Supply +1. Rest of China ?

Tuesday, July 15, 2008 23:18
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The last 20 months have been tough for energy planners in China, and it is a problem that has shown some of the weaknesses of hyperdevelopment

an inability to build infrastructure as fast as it is needed.

Well, as covered on a few other posts, this is a problem that is not going away any time soon – and through reading the article China beefs up coal transportation to ease power supply strain in Beijing and neighboring areas and my post from yesterday Smaller Smelters Agree Over Output Cuts , it is easy to see that Beijing will ensure the energy needs of the Olympics at all costs.

Where this is a concern for the greater economy is simply the fact that coal in China is a zero sum game, and that by giving more to the Beijing area for the games, they must take it away from other places.  

Some of these areas, Changsha and Guizhou, have strong manufacturing bases – particularly in the area of metals and primary processing – that will have an ongoing trickle up effect where some OEMs and 2nd tier suppliers may be impacted.

At the same time, by diverting coal to Beijing (keep in mind they are still diverting to Sichuan), it could possibly knock off a lot of rail cargo space as well.

So, if you are a manufacturing firm in a 2nd tier central province, or you are reliant upon the rail for moving your goods… you may need to start looking at your options.

Fortunately, this is a problem that central planners are well aware of, and there are plans, but China’s seemingly endless shocks to the system (snow storm, Olympics, drought) just poke holes in the already thin margins for error.

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