On November 27, 2019, a man approached a coal-fired power plant in Harbin, Heilongjiang Province, China. REUTERS/Jason Lee
Beijing, September 24 (Reuters)-China’s commodity producers and manufacturers may finally have some relief due to expanding power restrictions disrupting industrial operations.
Beijing’s top economic planning agency, the National Development and Reform Commission, said on Friday that it will work to resolve the power shortage that has plagued production since June, and with the implementation of ambitious new measures to control emissions, in recent weeks Intensify. read more
It specifically pointed out that the fertilizer industry, which relies on natural gas, has been hit particularly hard, and called on the country’s major energy producers to fulfill all supply contracts with fertilizer manufacturers.
However, the impact of the shortage is widespread. At least 15 Chinese listed companies that produce a range of materials and commodities (from aluminum and chemicals to dyes and furniture) said their production is affected by power restrictions.
These include Yunnan Aluminum (000807.SZ), a subsidiary of China’s state-owned metal group Chinalco, which has cut its 2021 aluminum production target by more than 500,000 tons or nearly 18%.
The Yunnan subsidiary of Henan Shenhuo Coal and Electricity (000933.SZ) also stated that it will not be able to achieve its annual production target. Although the parent company has transferred about half of its aluminum production capacity to southwestern provinces to take advantage of the abundant local hydropower resources.
In the first half of this year, only 10 of the 30 inland regions achieved their energy targets, while energy consumption in 9 provinces and regions has increased year by year, and relevant provincial departments have stepped up emission control efforts. read more
Only the eastern province of Jiangsu said this month that it had begun inspections of 323 local enterprises with annual energy consumption exceeding 50,000 tons of standard coal and 29 other enterprises with high power demand.
These and other inspections helped to limit energy use across the country, reducing China’s electricity generation in August by 2.7% from the previous month to 738.35 billion kWh.
But this is still the second highest month on record. After the pandemic, global and domestic demand for commodities recovered with the support of stimulus measures, and overall electricity demand is high.
However, the problem is not limited to China, as record natural gas prices have prompted energy-intensive companies in many parts of the world to cut production. read more
In addition to power-intensive industries such as aluminum smelting, steel smelting, and fertilizers, other industrial sectors have also been affected by power outages, triggering a series of sharp increases in the prices of raw materials.
The price of ferrosilicon (an alloy used to harden steel and other metals) has soared by 50% in the past month.
In recent weeks, the prices of silicomanganese and magnesium ingots have also soared, setting record highs or multi-year highs together with the prices of other key hard or industrial inputs such as urea, aluminum and coking coal.
According to a soybean meal buyer in the region, food-related commodity producers have also been affected. At least three soybean processing plants in Tianjin on the east coast of China have recently closed.
Although the National Development and Reform Commission’s plan to investigate power shortages is expected to alleviate some pain in the short term, market observers expect Beijing’s stance to limit emissions will not suddenly reverse.
Frederic Neumann, co-head of Asian Economic Research at HSBC, said: “Given the urgent need to decarbonize, or at least significantly reduce the carbon intensity of the economy, stricter environmental law enforcement will continue, if not further strengthened.”
Subscribe to our daily featured newsletter to receive the latest exclusive Reuters reports sent to your inbox.
On Monday, the bonds of Chinese real estate companies were hit hard again, as Evergrande seemed to miss the third round of bond payments in a few weeks, while rivals Modern Land and Sony became the latest companies vying to postpone the deadline.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people around the world every day. Reuters provides business, financial, domestic and international news directly to consumers through desktop terminals, world media organizations, industry events and directly.
Rely on authoritative content, lawyer editing expertise, and industry-defining technology to build the most powerful argument.
The most comprehensive solution to manage all complex and expanding tax and compliance needs.
Information, analysis and exclusive news about financial markets-available in an intuitive desktop and mobile interface.
Screen high-risk individuals and entities on a global scale to help discover hidden risks in business relationships and interpersonal networks.