China’s energy crisis, a new and unexpected opportunity for Europe?
These days we keep seeing reports on the news about the global energy situation, especially in China, where gas and electricity have been rationed for weeks. This is reflected in the gas (NYMEX: NGZ21) and oil futures (NYMEX: QMF22), which are showing really high prices. This shortage situation is causing Chinese companies, which can only manufacture for a small part of the week, to have to raise their prices considerably to cover their fixed costs, and also to have much longer delivery times, which leads to significant delays in the delivery of orders.
And the bad news doesn’t stop there; the cost of shipping has increased tenfold in one year, and ships, routes, and frequencies have been reduced. While a year ago, companies could quickly ship a container from China with a departure to Europe in a few days, now there are waiting lists, and most ships do not leave until they are full, without respecting specific departure dates.
But how does this affect Europe?
I think that, in the short term, it is clear that we are facing the perfect storm: A supplier that delays orders and doubles prices, and a transport that multiplies by ten times its rate and that will not load the container until the next available ship, which will leave when it is full and without a specific date. Tragic, isn’t it?
However, where is the opportunity for Europe? Because at first glance, I think everything points to widespread shortages and inflation about to explode.
Many companies that had given themselves over completely to the Asian giant are (re)discovering local suppliers, where they find speed and reactivity at prices that are now competitive again because of the situation in China.
This redirection of orders from Asia to local companies is already causing many small industries to expand staff and work shifts in order to respond to the growth in demand. This is reflected in the unemployment figures for the last few months in Spain, where the figures are quite positive.
It is true that Europe does not escape from energy shortages or lack of transport (see the crisis of lorry drivers in the UK), but I believe that the old continent must be much more prepared for these problems than China, which has experienced exponential growth, without thinking about whether this speed was viable for the country.
Everything points to the fact that the situation does not seem to change in the short term, but on the contrary; China has not yet responded to the energy needs of its industries, while shipping companies have already informed that from now on this new way of proceeding will be the one they will follow in the future.
It remains to be seen whether this new situation will lead to a relocation of industries in Europe, which would undoubtedly give oxygen to the battered economies of the old continent and benefit its citizens in the short term.
It is always said that the word “crisis” means “change,” and in this case I think it makes perfect sense.
Could this be a golden opportunity for Europe, and will it be seized?