As if there were not enough problems to deal with, China is undergoing factory closings due to electrical power rationing by the government. Among the ten provinces experiencing the cut-offs is Guangdong, home of the bulk of China’s toy production and its busiest ports (Ningbo, Yantian, and Guandong to name three).
As we all know only too well, China has been dealing with the effects of Covid, backed-up ports, the threat of a mega-bankruptcy by Chinese conglomerate Evergrande, and even a typhoon. Why would the Chinese government choose to restrict electricity at this time? The reason given for the cut-offs is the need to control carbon emissions. Okaaaaay…but why now?
This is bad news for the global toy industry. Here is how The Loadstar writer, Martha Li, puts it in her article, “Container Shipping’s Latest Shock: Blackouts in China,” describes the impact on Europe and China:
As this is the peak season for container shipments to US and European retailers, the new moves could exacerbate delays in receiving shipments at the ports, especially when the power cuts last beyond the end of September. And congestion on the US west coast has held up shipments, with some 70 ships waiting outside Los Angeles and Long Beach due to surging imports and insufficient trucking and land-based logistics.
Bloomberg quotes the China economist at Nomura Holdings Inc in Hong Kong as stating:
“Global markets will feel the pinch of a shortage of supply from textiles, toys to machine parts…The hottest topic about China will very soon shift from “Evergrande” to “Power Crunch.
Tough times for China means a tough time for the U.S. toy industry. What’s next?