China’s power crunch has limited effect on petchem production

13 January 2010 09:46  [Source: ICIS news]

By Fanny Zhang

GUANGZHOU (ICIS news)--The power supply problems across China are having a limited effect on petrochemical production, but concerns about possible increased disruption still exist, industry sources said on Wednesday.

Continuous harsh weather conditions - heavy snow plus wind - nationwide, particularly in the northern regions since the beginning of the year, have been driving up heating-purpose power consumption and have also interrupted the transport of badly needed coal for power generation, according to sources.

Many power plants had shut generators because of the coal shortage. The government had ordered limits on industrial usage, with residential use being the priority, potentially posing a problem for many manufacturers, sources said.

The central area of the country, which covers Hunan, Hubei, Henan, Jiangxi and Sichuan provinces as well as Chongqing Municipality, had so far been the hardest-hit during the power crunch. 

“We encounter power shortage problems every winter, but this year’s gap is extremely huge,” said an official from Central China Grid Co, the main power supplier in the central region.

A source from Hubei Provincial Power Bureau said: “We are limiting supplies to high power-consuming industries, including chemical raw material and some chemicals productions. We don’t set quotas but will cut supply once the load reaches an alarming level.”

However, big petrochemical producers had not yet seen much effect.

“We haven’t received any advice on reducing power use and all productions are normal,” said a source from Hubei-based Sinopec Wuhan Company.

“Refineries like us won’t get affected if the shortage is not that severe. No fuel, no everything. If refineries stop production, all the businesses will have to stop,” the source said.

A source from Sinopec Jingmen Petrochemical said: “Some small downstream units may shut for a while if there’s a need [to cut power use]. But upstream refining and cracker units will still run as usual.”

A source from a Hunan-based methanol plant said the power problem had been affecting its production, but only in a limited way so far. “We’re prepared for this as this happened almost every year,” the source said.

A local dimethyl ether (DME) producer said its operating rates had been falling ever since mid-December due to the persisting power shortage. Daily DME output in Hubei province was estimated to have been reduced by 45% to around 720 tonnes on 12 January from 1,300 tonnes in early December, according to China energy market intelligence service C1 Energy.

Prices of DME therefore firmed to Yuan (CNY) 3,900/tonne ($571/tonne) on 12 January, up 7% from early December, according to C1.

Local purified terephthalic acid (PTA) producers had not felt the squeeze.

The Central Grid estimated that power deficits would last until early March, when the coal shortage would likely be relieved. 

“If tougher measures are taken to control power use, we may have to shut or cut productions,” a DME producer said.

A refinery source said: “We’ll cut utilisation of small units when necessary.”

According to weather forecasts, low temperatures would still dominate the country in the coming few days, with heavy snow in northwestern areas

($1 = CNY6.83)

Kino Zhu and Sam Liang from CBI China contributed to this story

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