08 September 2010 06:20 [Source: ICIS news]
By Judith Wang
SINGAPORE (ICIS)--China’s recent power restrictions to meet environmental targets will likely continue to the end of 2010 resulting in reduction of output of some petrochemical products, though that may boost their prices, analysts said on Wednesday.
China set a target to cut its energy consumption per unit of GDP by 20% over the five-year period of 2006–2010. The country had achieved a 16.59% reduction in its energy consumption, based on a government report dated 15 July.
“In view of current conditions, the “20%” target is very difficult to achieve, although China has demonstrated its determination to do so,” Pei Yunpeng, an analyst from Beijing-based brokerage firm Shanxi Securities Co told ICIS in Mandarin.
The local governments of Zhejiang, Jiangsu and Hebei had earlier implemented power restrictions on high energy-consuming plants, such as fertilizer and chlor-alkali units, in those provinces from July to September this year, in order to fulfil the quota stipulated by the central government, analysts said.
China’s State Council, or cabinet, had also dispatched six teams to supervise the progress of energy saving and emission reductions in 18 provinces between late August and early September, according to Chinese media reports.
The massive power restrictions would last until the end of the year, if Chinese policy-makers found that they could not fulfil their target of a 20% reduction, added the analysts.
The possibility that the government would introduce more strict measures could not be ruled out either, they said.
“The output of chemicals, steel and cement would be affected. Some chemical producers would rather shut down their plants than run them intermittently on the power cuts,” an analyst from Shanghai-based Everbright Securities Co said in Mandarin.
“The operating rates of chlor-alkali plants, which consume high amounts of power, have already fallen to around 60%, from over 70% in June, on the power crunch. The tough measures are really impacting the output,” Pei said.
The local government of Changzhou, eastern Jiangsu province, had earlier ordered local industrial companies – including those from the chemical, textile, equipment and machinery manufacturing sectors – to shut down for five days after running for nine days, beginning from 27 August.
Textile dyeing producers in China’s eastern Zhejiang province was also ordered by the central government to shut down for 15 days between early July and mid-September, said a textile trader based in Shaoxing city. The province is a major textile-manufacturing hub of the country.
“I have never seen such massive power restrictions! I have to look for other plants to rush and complete my orders, after the plant I usually deal with was shut down. So that was definitely a bigger risk for our company, because we have not engaged them before,” said the trader said.
In Ningbo, eastern Zhejiang province, some polyester plants were forced to operate for only one out of every three days, said a polyester trader based in Shanghai.
“Some producers had to buy power generators just to remain in operation,” he said.
Polyester plants in Xiaoshan, Zhejiang province, were allowed to run for six days before having to shut down for a day, the trader said.
Analysts said the domestic prices of some chemical products would probably rise in the coming months, on the back of the reduced output.
“The power restriction measures have now become a ‘political’ matter,” said the trader.
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