China PVC demand to be affected by electricity shortage in June

27 May 2011 09:18  [Source: ICIS news]

SHANGHAI (ICIS)--China’s polyvinyl chloride (PVC) industry is expected to face downward pressure in its downstream sector in June because of electricity shortages, industry sources said on Friday.

China has been experiencing electricity shortages since March this year because of heavy demand for diesel at the peak of the country’s manufacturing season. In previous years, this shortage typically occured in June, the sources said.

Downstream sectors for PVC, such as film, cable and plastic pipes, are expected to be affected by the government’s power restrictions in select regions of China, market participants said.

“We are shutting down one day after every five days of operations,” said You Zuohu, chairman of Zhejiang HuaTai Plastic in eastern China.

“The power quota does not affect our production at present because of moderate orders, but it is hard to [estimate future orders],” he added.

The Chinese government will further restrict power supply, leading downstream producers to operate for 3-4 days a week in June and July to ensure there is enough electricity for residential use, industry sources said.

“We [were told] by the local electricity authority to cut electricity consumption by [shutting] plants one day per week,” said Ma Jianfeng, manager of Tende Cable Compounds in eastern China’s Zhejiang province.

The purchase volume of PVC has shrunk to 1,500-1,600 tonnes per month, lower than the usual 2,000-3,000 tonnes, Ma added.

“We had no idea that the power quota would be [imposed] in June, when power demand is [at its peak] in the country,” said a plastic pipe producer in Jiangsu province. “Our facilities have had to stop production two days in a week since 20 May,” he added.

China’s total electricity output was 1,065bn kilowatt-hours (kWh) in the first quarter of 2011, according to data from China Electricity Council, a power-industry federation.

This is an increase of 13.4% compared with the same period in 2010 and a 7.6% increase compared with the fourth quarter of 2010, showing an increase in commercial power consumption.

Electricity producers in China are struggling with the increasing costs of feedstock coal and the inability to raise electricity prices which are controlled by the Chinese government, industry sources said.

Additional reporting by Amanda Zhang

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By: Maggie Zhu

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