China's Weather Report: Because It Really Matters
Last winter, I went to Alaska at the last minute. Upon landing, I looked out my plane window and thought, "gee, snow. Guess I should have brought my coat." This same thing happened to me once when I went to Chicago. Weather bores the hell out of me, particularly weather in a place where I am not. Today, I realized China's weather problems are more than local.
China's snowy weather is already impacting China business and prices and the longer it continues, the greater the impact. When China gets a cold, the whole world sneezes.
Managing the Dragon has two excellent posts up explaining the impact of China's snow. The first is entitled, "Extreme Weather Affecting Operations in China," and it describes how China's weather is slowing factory production:
Highway, rail and air service are being impacted, with shipments of coal, fuel and other raw materials to power plants and manufacturing plants being seriously delayed.Our information is consistent with that reported in major media. We believe that factories in as many as 17 provinces are being affected, with those in Hubei, Hunan and Jiangsu being amongst the hardest hit. Many are facing power shortages and significant delays in receiving raw materials. Due to priorities being placed on getting much needed coal to power plants, some are being told by logistics providers that shipments of finished products to customers may be delayed for as much as two weeks. This means that both production and sales of many factories in China will be negatively affected in both January and February.
Then, in a newer post, entitled, "China Storm Update," Managing the Dragon warns of a two to four week interruptions in Chinese product supply.
MSNBC's World Blog has a post that does a nice job of explaining in very simple terms how the snow is driving up prices in China. The post is entitled, "Steep Prices Chill China's Markets" and it describes how fruit and vegetable prices in Beijing have risen some 50 percent due to the snow. Economics says this rise in food prices could lead to a rise in wages, which in turn will lead to a rise in product prices. Snow is temporary, of course, but the longer it continues to disrupt, the greater its permanent impact.
All Roads Lead to China has a post, entitled, "China’s Power Crisis. What is Happening. What the Impact Is/ Could be. And What You Should Do," that lives up to its title. Rich Brubaker of All Roads is a logistics guy and this post very nicely sets out how the weather will impact China production and logistics.
Paul Maidment over at Forbes.com has a very interesting article on the impact of the snow on various multinationals and he also notes how weather nearly always makes those in power look bad -- it's a truism in Chicago that to get relected, the mayor better keep the streets plowed. The article also has a series of amazing pictures of the storm, here.
Co-blogger Steve Dickinson is fervently hoping to leave Shanghai on Tuesday to ride out the storm in sunny Cambodia.
Comments
Dan,
The factories were going to shut down for 2-3 weeks away for Chinese new year, and from an exporter standpoint we were already prepared for more (i.e. most people have pushed orders out anyway).
Where this gets ugly is long term. All Roads has put up a lot on the history of this and you really should be pointing people there as his post offers advice for damn near anyone who has anything to do with China. Link is Here
As for the MSNBC piece. Again. misses the scale of the problems.
Posted by: Stuk n Shanghai | February 4, 2008 4:17 AM
Good luck to all the exporters and their customers arguing "force majeure."
When U.S. district court judges usually won't grant such recognition to Force 10, or maybe even 11 (on the Beaufort Scale, where Force 12 is essentially the end of the world) storms, as being unforeseeable, while all that time the officers and crews had been praying to God that they might just get through alive, it will be interesting to see the legal fallout from this chilling weather pattern and its inevitable string of economic losses to everyone up and down the chains of production and distribution.
There might be the "rogue snowstorm" argument, akin to the generally unsuccessful "rogue wave" argument in maritime law. Get your meteorological experts ready.
Posted by: Law Office of Todd L. Platek | February 4, 2008 8:48 AM
Stuck n Shanghai,
You are right. All Road's post is very good and I am going to add it to my post. Thanks.
You are also right about how the factories were going to be closed anyway, but I am not sure why you are mentining that since this snow is still going to set things back for weeks and weeks?
Posted by: China Law Blog | February 4, 2008 8:51 AM
Suppliers in China and buyers in the West had pretty much from half-a-year ago planned for the long Spring Festival Break. Much of the recent “unplanned” surprises come as a result of the weather forcing a sharp jump in inflation of everything from an apple through Chinese spinach through a bowl of noodles. The already-high inflation rate was already rising very nicely on its own, thank you. Fruit now is as expensive as anywhere in the Midwestern United States; actually, it may even be cheaper in the Midwest because the transport logistics from Mexico is so mature. It’s nice right now that electricity rates are frozen in China; however, what with coal prices not regulated, there will be hell to pay for companies and residents when they release the lid on the electricity rates, perhaps come the thaw (the coal suppliers are really suffering during the blizzards, by all accounts).
So, I have a precious banana in one hand; an exquisite bowl of pork noodles in the other; am wrapped in a blanket with a space heater at my ankles and don't plan to move anywhere. Even if I could.
Happy Spring Festival from Suzhou!
Posted by: This is China! | February 4, 2008 8:34 PM
Forbes.com has some pretty pictures -- and some serious commentary -- that may be of interest here: http://www.forbes.com/2008/02/02/china-snow-crisis-markets-cx_pm_0202snow_slide.html
Posted by: Paul Maidment | February 5, 2008 5:19 AM
Another whole shot in the wonders of central planning.
Posted by: nanheyangrouchuan | February 5, 2008 9:20 PM
Todd Platek,
Leave it to you to think of the legal angle, but I guess you are right that this will create more work for us lawyers.
Posted by: China Law Blog | February 6, 2008 6:31 AM
This is China,
Vietnam anybody?
Posted by: China Law Blog | February 6, 2008 6:32 AM
Wang Chin,
Yes but.... Chinese companies are no doubt going to use this as an excuse to raise prices. They are already doing so.
Posted by: China Law Blog | February 6, 2008 6:32 AM
Paul Maidment,
Great link, great story, great pictures. I added all to the post.
Posted by: China Law Blog | February 6, 2008 6:33 AM
nh,
You are right, central planning does not work well when things go completely off plan.
Posted by: China Law Blog | February 6, 2008 6:34 AM
CLB: I'm just a simple country lawyer from NYC. News has it that COSCO is diverting vessels from int'l service to domestic coal-carrying service. Other shipowners may follow. Do we sense any ensuing charter party disputes, or is the market soft and these vessels were underemployed anyway? TLP
Posted by: Law Office of Todd L. Platek | February 6, 2008 2:55 PM