SMM Exclusive: Minimal Impact on Aluminum Fabricators from Power Limits in Guangdong Province

SHANGHAI, July 19 (SMM) -- Electricity demand and supply becomes the focus of market players with the advent of summer, and some areas of Guangdong province have started the implementation of conventional measures to limit power usage in industries, with the power shortages in this region seeming to intensity this summer.

Guangdong province faces difficulties in achieving complete self-sufficiency, with most electricity supply depending on southwest China in the past. However, the severe drought in southwest China in 1H reduced this region's capacity of power supply to some extent, which directly results in current tightness of power supply in Guangdong province. In addition, the forthcoming Asian Games in 2H leaves more stringent requirements concerning power reserves in Guangzhou city. In this context, Guangzhou and surrounding cities face severe power rationing pressure. 

At present, these cities mainly carry out the "peak load shifting" policy to limit power usage. Enterprises in Foshan city reveal that this policy has been implemented since late June, and electricity will be supplied by only half a day in 2-3 days a week, from 20:00 to 8:00 the next day. The electricity demand grows persistently following rising temperature, and some areas even can not supply electricity all day for 4 days a week. Enterprises in Qingyuan city said the extent of power limits in this region is weaker than Foshan city, with 24 hours electricity supply failing to materialize only one day per week.

Although electricity limits have become the focus of aluminum fabricators in Guangdong province, any negative impact on output of aluminum semis from power limits is relatively limited currently.

First, the majority of aluminum fabricators have not run at full capacity since June. Guangdong province is a major aluminum profile producing area, and China's moves to rein in property markets heavily depressed market sentiment, so producers of aluminum profiles for construction use report declines in orders currently. Meanwhile, the start of traditional low demand period further lowered operating rates at these producers, with their output even posting a negative growth. According to incomplete statistics, overall operating rates at aluminum profile producers were only 73% in June, lower than May's 75%. Most producers are pessimistic toward future orders in the following two months. 

Second, it is normal that power supply becomes tight in summer, so aluminum fabricators have made preparations with response measures, and they have equipped with power generation facilities. In this context, some manufacturers can still achieve the self-sufficiency of power supply with the start of electricity rationing policy. 

Third, SMM sources report some large enterprises are not within the scope of electricity restrictions. Meanwhile, in addition to the "peak load shifting", "regional peak load shifting" will also be implemented. Although any impact from these measures on aluminum fabricators remains unknown, most fabricators said they are optimistic toward power supply.

Peak load shifting policy continues, and how long it will continue is unpredictable, but on the whole, power restrictions have not affected aluminum fabricators significantly so far, and any negative impact on aluminum consumption in Guangdong province is expected to be minimal in the short term.

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