China Electricity Cuts Unlikely to Affect Big Steelmakers
May 19 (Bloomberg) -- Dave Dai, a Hong Kong-based analyst at Daiwa Securities Capital Markets, talks about power shortages in China. China’s seasonal summer electricity shortages may worsen this year as a surge in coal costs deepens tensions between the nation’s power-generating companies and regulators who cap the rates they can sell to utilities. Dai speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
China’s electricity cuts probably won’t be extended to bigger steel makers in northern provinces such as Hebei and Shandong, CLSA Asia Pacific analyst Scott Laprise said.
“This time, we have power cuts that are more regionally- based,” he said today in Beijing, where he is based. The government is limiting power supply in Jiangxi, Zhejiang, Guizhou, Hunan and Chongqing provinces, which account for 9 percent of the country’s total steel output, Laprise said in slides presented at a forum.
China may face a summer shortage of 30 gigawatts of power as supply lags behind demand growth, the China Electricity Council said on April 29. Hunan Valin Steel Co., partly-owned by the world’s biggest steelmaker ArcelorMittal (MT), and smaller mills in China’s south cut output because of local power shortages.
“Currently, we don’t see a big impact,” Laprise said. There may be “seasonal impact” on steel output in the summer, he said.
Hebei Iron & Steel Group, China’s biggest steelmaker, and Shandong Iron & Steel Group, China’s seventh-largest, haven’t reported any power shortages.
Mandatory power cuts to meet energy-saving targets in the fourth-quarter last year forced steel and aluminum producers to reduce output or close mills. The cut affected steel mills in provinces including Hebei and Jiangsu, which account for 59 percent of national output, CLSA’s Laprise said.
Lower Demand
Power shortages also hampered the industrial sector and eroded demand for steel, he said, without providing figures.
Aluminum producers in the power-rationing provinces account for roughly 10 percent of the country’s production, and the impact has been “very marginal,” said Ian Roper, a Shanghai- based commodities strategist at CLSA. He didn’t name any smelters that have been affected.
A disruption in aluminum supplies may occur in June or July when power shortage is expected to worsen because of rising demand for air-conditioning, said Andrew Driscoll, head of metals research in Hong Kong. Supply shortages may boost international prices of the lightweight metal, he said.
--Xiao Yu. Editors: Keith Gosman, Indranil Ghosh
To contact the Bloomberg News staff on this story: Xiao Yu in Beijing at yxiao@bloomberg.net
To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.
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