Quarantines and industry lockdowns in China have caused substantial supply chain disruptions, causing shortages of imported equipment for Korea’s energy-intensive industries, according to a Fitch Solutions report.
Manufacturing accounts for a large share of Korea’s power consumption, hence the Purchasing Managers’ Index (PMI) contracted in January and analyst anticipate the sector will continue to struggle well into the summer months.
Coal looses out to LNG
Sluggish electricity demand will likely led to a decline in coal-fired power plant dispatch, which may work in favor of gas-fired generation, based on imported and regasified LNG.
Prior to the corona pandemic, the Government in Seoul already announced a temporary suspension of 15 coal plants by the end of February, and to idle up to 28 coal plants by March. The remaining coal plants will have a cap on operational capacity of 80%, and six ageing coal plants will be retired by 2021.
The coal caps are part of a new energy policy roadmap, released in 2019, that includes bans on new-build coal power unit and a conversion of several existing ones to run on regasified LNG.
Looking ahead, Fitch sees a significant slowdown in electricity demand growth as South Korea’s GDP is projected to grow just 1.7% in 2020. Weak private consumption due to corona contingency measures will impact retail and services sectors.