By Shivani Singh and Gabriel Crossley

SHENYANG, China (Reuters) – Small firms caught in China’s prolonged power and coal crunch are turning to diesel generators, or simply shutting shop, as coal officials voiced fears for stocks ahead of winter and manufacturing shrinks in the world’s no. The second largest economy.

Beijing is scrambling to send enough coal to electricity utilities to restore full supply, with the worst power outages in years affecting large swathes of the country (https://www.reuters.com/world/china/china-seeks-calm-power-supply-fears-crunch-bites-2021-09-29), especially three northeastern provinces, including Liaoning that are home to nearly 100 million people.

Now in their second week, the shortages are being triggered by an increasing price for coal. China is China’s number one source of fuel. The number 1 fuel source for electricity production is at an all-time high due to tight supply, higher emissions standards, and strong demand.

Business owners in Liaoning’s capital city, Shenyang, told Reuters on Thursday they were losing money, as official data separately showed the country’s official measure of manufacturing contracted in September – for the first time since February 2020 https://www.reuters.com/business/china-factory-activity-unexpectedly-shrinks-services-recover-2021-09-30.

China Coal Industry Association stated that it was concerned about the low coal supply at its power plants and warned firms to be cautious ahead of peak season.

According to the association, it asked businesses to make every effort to improve supply and to adjust their sales strategies to non-key users with high energy consumption, or those who have not signed long-term agreements.

Reuters was able to visit a Shenyang industrial laundry that had been shut down for the last few days. The workers were complaining about losing their money and having to switch to diesel generators because of the power shortage.

Staff at a closed steel part factory said that they have decided not to rent generators but might do so in the event of a power cut.

China’s farmers, according to industry experts and analysts, are suffering huge losses due to the disruptions in power supply.

Residents have been assured by officials this week that power will continue to be available for their heating and household needs as the winter draws near.

Citi analysts stated in a note that they expected China to experience power shortages in winter when heating demand – mainly coal-fired power sources – reaches its peak.

The National Development and Reform Commission of China (NDRC), China’s government planner, stated Wednesday that electricity prices would continue to fluctuate within a safe range and will allow them to reflect changes in market fundamentals and cost.

Guangdong Province Development and Reform Commission released a late August statement stating that the government would increase the power tariff 25% for peak loads.