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Factories Hit By Power Shortages

Carol Chan – Updated on Jul 08, 2008 – SCMP

The mainland is again experiencing power shortages at the beginning of the peak summer season and some regions have forced high energy consuming factories to halt or reduce production temporarily.

Aluminum Corp of China (Chalco), the mainland’s biggest alumina and aluminium producer, has halted some production at its plants in Shanxi province, where the authorities have issued a “red” warning on power supplies.

Power for energy-intensive and polluting factories in the region would be limited, and priority given to agricultural and residential users, the State Electricity Regulatory Commission said in a newsletter yesterday.

The extent of the power shortage in Shanxi, the country’s largest coal-producing province, reached 4,647 megawatts on June 26, the commission said.

“There is limited power availability [in Shanxi] because of tight coal supplies. So far, the impact has been minimal,” said Chalco investor relations manager Zhang Qing.

Chalco has two smelters in the province with a combined capacity of 500,000 tonnes of primary aluminium a year. Ms Zhang did not quantify the impact and said plants in other provinces had not encountered similar situations.

Mainland newspapers said Zhengzhou, Henan province, was also rationing power and that mining companies and big industrial users would be the main targets.

Industrial users were targeted for power rationing in times of shortage because they accounted for about 70 per cent of the country’s electricity consumption, said Guotai Junan Securities analyst Martin Wang.

Mr Wang said the situation was expected to worsen next month and in September as temperatures increased.

The mainland is experiencing its sixth year of power shortages. This year’s summer power shortfall would reach 16 gigawatts, the China Daily reported on July 1, citing the electricity regulator.

Reasons for the power and coal shortages include slower growth in fixed-asset investment in the coal industry, and measures by Beijing to temporarily cap thermal coal prices from June 19.

Mr Wang said the growth rate of fixed-asset investments in the coal industry slowed to about 5 per cent in February last year from about 49 per cent in June 2006.

“From investment to production, it takes two to three years. That’s why coal supplies are unable to keep up with growth in demand,” he said.

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