In a move set to send shockwaves through the supply chain, the Chinese government has announced a capping of industry outputs intended to reduce pollution ahead of Beijing’s Winter Olympics.
Chinese manufacturers across the country have received official notice from their local government offices requiring that they select a period of 15 days each month to receive electricity, from September through the end of the year. This plan is intended to reduce capacity to 50%.
Scores of companies have already said that the move of power rationing could force them to delay filling orders and could cause financial loss.
It is reasonable to expect that Chinese produced chemicals will be in tight supply, with prices set to increase. Many products have already experienced significant price increases in recent days.
In the end, however, the market is made up of both supply and demand. How much and how fast the prices rise will depend on the amount of material in stock and the panic to buy.