China’s petchem producers not affected by electricity outages

02 May 2011 04:44  [Source: ICIS news]

GUANGZHOU (ICIS)--China's eastern Zhejiang province has been experiencing an unusual power crunch, with daily shortages since the beginning of the year, although petrochemical plants have escaped the electricity outages so far, sources said on Monday.

The total shortfall is estimated to be about 2,000-3,000MW.

The electricity supply to industrial users was disrupted around 500,000 times in the first quarter alone, according to media reports.

The situation is expected to get worse in the second quarter, when summer begins and the weather gets warmer.

“The power crunch usually happens in the peak summer season only. But this year, we see electricity shortages in spring and the supply gap was the biggest since 2004 in our records,” said a source from Zhejiang Electric Power.

Zhejiang’s power shortage may reach 3,500MW/day this summer, the source added.

China faces electricity shortages almost every year, especially in summer when the hot weather drives up power consumption and powerplants and grids are not being built fast enough to meet the demand, experts said.

“In more industrialised regions like the east and south that cover Shanghai, Zhejiang, Jiangsu and Guangdong, power shortages have become more evident in the past few years,” said a source from China South Power Grid (CSG), adding that this was because the economy was growing too quickly.

The CSG source added that grid companies in the east and south are buying an increasing amount of power from western China where consumption is relatively low.

For example, the volume of electricity that Zhejiang bought in the first quarter was a year-on-year increase of nearly 30%, according to data from Zhejiang Electric Power.

The power demand in Zhejiang is estimated to be above 50,000MW/day, but the province can only produce up to 46,000MW/day.

The National Development and Reform Commission (NDRC) said in a 22 April report that China’s power consumption in the first quarter of 2011 increased by 12.7% year on year to 1,091bn kWh. In March, consumption reached 388bn kWh, which was almost on par with that of the last peak season in July and August 2010.

The NDRC has predicted a major power shortage this summer in the eastern, southern and northern regions.

However, most petrochemical companies say they have not received any instructions to restrict their electricity usage.

“Companies like us are guaranteed on power supply as we’re key producers. We have our own backup plants, which can generate power in an emergency,” said a source from Zhejiang-based Zhenhai Refining and Chemical Co (ZRCC), which operates a 23m tonne/year refinery, a 1m tonne/year cracker and various downstream units.

“We haven’t experienced any cutoff so far and all our plants are operating at 100% load,” said a source from Zhejiang-based Rongsheng Petrochemical, a leading polyester producer. 

“We usually can get sufficient power,” said a Zhejiang-based purified terephthalic acid (PTA) producer. The 1.2m tonne/year PTA plant may be shut for maintenance in July or August when electricity supply becomes extremely tight, he added.

Meanwhile, chemical players in Jiangsu province have not been affected by the electricity disruptions as the government has been cutting supply to highly polluting industries such as steel and cement. The producers said they expect to have enough supply this year.

“Producers of styrene and vinyl acetate [monomer] [VAM] are lowering their output by 20-30% these days due to a slump in sales and I haven’t heard of any power cutoffs to them,” said a Jiangsu-based chemical trader.

On the other hand, spiking coal prices are dampening the production of coal-based powerplants. Over 80% of China’s power needs come from coal-fired generators, according to data published by the National Bureau of Statistics.

In China, coal prices are subject to market forces, while the on-grid and retail prices of electricity are regulated by the government. The Chinese government has not raised the prices of utilities because of inflation worries.

On 10 April, the NDRC raised the on-grid prices in 16 provinces, including Shaanxi, Shandong and Henan, by an average of CNY0.012/kWh ($0.002/kWh) to encourage power generation. In addition, it has been taking measures to control coal prices and supply.

However, experts said that the only effective solution is to deregulate electricity prices.

($1 = CNY6.49)

By: Fanny Zhang
+65 6780 4359

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