REGIONAL REPORT Ӏ FAR EAST
‘Beijing has been forced to revise its plans… China has stumbled into an energy crisis in much the same way as the rest of us have done but it is exacerbated by the fact that their grid and electricity companies are subject to price controls and cannot pass the prices on. Many have decided to shut down production and they have had a lot of power outages for households and companies.’ Echoing the same messages, Premier Li Keqiang stressed the importance of regular energy supply after parts of China were plunged into darkness by rolling blackouts, hitting both factories and homes. Obviously, in China, just as
in the rest of the world, such issues as power cuts, etc are politically incendiary. It’s been reported that China’s top two coal producing provinces – Shanxi and Inner Mongolia – have been ordered to support the country’s power supply crisis. A reflection of the ‘pinch’ in which some of China’s manufacturers are finding themselves is in the announcement made on the website of Jiaxing Jingyang Construction Machinery Co. Ltd (
www.jingyangroup.com) – the leading international supplier of passenger hoists and GJJ tower cranes. The company announced that it is suffering from Chinese Government electricity cut-offs, increased raw material costs and import parts supply delays. Jingyang says because ‘they are losing too much money’ they have had to increase machine and parts prices, adjust delivery schedules and, since May, cancel any contracts signed without payment and invalidate earlier quotations. The price increases amount to +8% on hoist and tower crane parts; +15% on whole hoist units; + 11.5% on tower cranes; +12% on imported electric components; and +5.5% on Chinese electric parts.
INDONESIA’S PLIGHT Turning abroad where, often under the Belt and Road initiative, China has participated in building coal- fired power plants in emerging nations, President Xi has pledged to cease such activities. Within S.E. Asia, the region’s most populous nation, Indonesia has largely ignored the transition to renewables and grown ever more reliant on foreign (mainly Chinese) investment to support its coal- fired power projects. The Suralaya power plant in Banten province has the second largest operating coal- based capacity linked to China. Indonesia has the worst air pollution in SE Asia and eleventh worst in the world. In 2014 Indonesia initiated a 35GW power procurement programme that drew in new coal projects involving Chinese companies, banks and developers. Now, following China’s announcement that it would ‘not build new coal-fired power plants abroad’ almost 80GW of planned coal power projects backed by China are suddenly effectively ‘dead in the water’. C.R.E.C. found that since 2017 twice as much coal-fired power capacity linked to China has been either shelved or cancelled than constructed in Indonesia. Still Indonesia is seventh in the global league table of the most coal-fired power plants with 77. But it's not just an Indonesian problem, during the past five years the construction of coal-powered projects outside of China has collapsed.
Indeed the past couple of
years have been difficult for Indonesia. Covid and lock-down were blamed for a 2% reduction of 2020 GDP as foreign direct investment contracted by 22%. Overall construction activity declined by 2.8% and mobile crane sales declined by over 20%. While mining was also squeezed, the growing and most valuable use of
nickel and tin, effective January 2020 caused the Government to ban the export of these raw materials as it attempts to encourage downstream investment in the local manufacture of batteries and electric vehicles. In an effort to boost the
economy, the government of President Joko Widodo (locally known as Jokowi) has announced an investment package worth $47.8 billion as well as a medium- term development plan to invest $412 billion to develop transport, industry, energy and housing by 2024. The investment in infrastructure projects is expected to boost the steel industry prompting the Chinese to invest in local steel production due to the strict Chinese governmental limits of steel exports. As part of their strategy
to combat the low prices of Chinese machinery, Japanese manufacturers have been developing production in SE Asia where their costs are lower than at home in Japan. Of course, this can only last until it starts to impact Japanese domestic employment. Although not widely-recognised as a machinery manufacturing base, both Hitachi Construction Machinery Co and Komatsu have long-established and large excavator and construction machinery plants in Indonesia. In 2011 they were joined by Sumitomo Construction Machinery Co which built a new excavator plant in Indonesia which in 2019 increased its production capacity. Strategically these plants offer an alternative to the lower-cost imported Chinese competition. In that respect Thailand serves a similar purpose for the production of small truck loader cranes for both Furukawa-Unic and Tadano Ltd while most recently Kato chose a new plant in the Philippines to manufacture its latest 60-tonne f
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