SHANGHAI, Sep 28 (SMM) - SMM has conducted a survey on the impact of the power rationing on the copper industry chain. And found that the power rationing has led to broad-based closures across downstream producers.

Regions implementing power rationing

Jiangsu, Guangdong, Shandong, Taizhou of Zhejiang, north-east China

Brief on power rationing

Jiangsu: Jiangsu has received notices of power rationing since September 16. SMM understood that copper processing enterprises in Changzhou and Taizhou began to suspend production from the Mid-Autumn Festival and will remain closed until the end of September; after the holiday, Yixing and Nanjing also received notices of power rationing. Therefore, copper rod companies has ceased production.

Shandong: SMM has received the feedback from companies since September 21 that many areas in Shandong are banned from production during 4-12 pm.

Guangdong: Industrial users across cities and counties in the Pearl River Delta region, like Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan, Qingyuan, Zhaoqing, Zhuhai and even Shantou as well as Jieyang, have undergone the power rationing since September 16. Most copper companies have been notified to implement the 4-on 3-off shift schedule. And several areas have gone so far as to operate 1-on 6-off. Specifically, all production and operational power supply will be cut off from 8:00 am to 11:00 pm.

Taizhou of Zhejiang: Staggered peak production has been implemented since September 26, except for the top 100 companies. The specific time is from 6:00 pm to 7:00 am, which will be effective for a week;

North-east China: State Grid Jilin Electric Power Supply Company has taken power rationing measures at 4:37 pm on September 23 on which day a notice was issued around 10:00 pm. And nine urban areas in the province have implemented the power rationing policy.

Impact and analysis on the supply side

Jiangsu: Jiangsu has received notices of power rationing since September 16. SMM understood that copper processing enterprises in Changzhou and Taizhou began to suspend production from the Mid-Autumn Festival and will remain shut until the end of September; after the holiday, Yixing and Nanjing also received notices of power rationing. Therefore, copper rod companies has ceased production.

Shandong: SMM has received feedback from companies since September 21 that many areas in Shandong are banned from production from 4-12 pm.

Guangdong: Industrial users across cities and counties in the Pearl River Delta region, like Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan, Qingyuan, Zhaoqing, Zhuhai and even Shantou as well as Jieyang, have undergone the power rationing since September 16. Most copper companies have been notified to implement the 4-on 3-off shift schedule. And several areas have gone so far as to operate 1-on 6-off. Specifically, all production and operational power supply will be cut off from 8:00 am to 11:00 pm.

Zhejiang: Since September 26, Taizhou has started to implement the off-peak production schedule. Except for the top 100 enterprises, most of the companies implemented the schedule. The specific time is from 6:00 pm to 7:00 am, which will remain effective for a week.

Impact and analysis on downstream operating rate

Wire and cable: Many provinces and cities have received notices of power rationing due to the recent policy of dual control on energy consumption. As far as we know, the wire and cable industry has been affected after the Mid-Autumn Festival holidays. Small and medium-sized cable companies in Yixing city of Jiangsu have experienced intermittent power outages and production restrictions, and cable companies in Guangdong are required to shut for up to three days every week. Moreover, the power rationing has led to shutdown at PVC chemical companies. This resulted in supply tightness and high prices of insulating materials at cable companies, lowering output.

Enamelled wire: The enamelled wire sector was also affected by the power rationing policy, which mainly affected enterprises in Guangdong. The power rationing in Guangdong varies across regions. Foshan and Zhongshan are required to halt production for at least 2-3 days per week. The enamelled wire industry is a major electricity consumer. Except for a few large tax-paying companies, most companies have reported that they are currently experiencing output cuts caused by power rationing. But on the other hand, most companies have not reached full capacity amid poor orders. Therefore, the current output cut is still controllable according to some companies, except for those that will be delivering cargoes in the near term. The production suspension at downstream buyers has affected demand for enamelled wire. Zhejiang has also begun to implement the power rationing, forcing downstream motor plants to stop production. And this has further affected enamelled wire companies

Copper rod: Affected by the dual control policy; most copper rod factories in Changzhou of Jiangsu have stopped production during the Mid-Autumn Festival holidays due to the power rationing notice issued before the holidays, and the suspension will last at least until the end of the month; the copper rod companies in Yixing were also affected by the power rationing policy and have stopped production since September 23. Some copper rod companies will stop production before the National Day holidays; output at the copper rod factories in Guangdong also declined due to the power rationing. The operating rate of copper rod companies dropped significantly due to power rationing. However, copper rod did not see a supply shortage due to the weaker downstream demand amid simultaneous power rationing.

Impact on end-users and feedback from companies

An enamelled wire company in Jiangxi: Among the downstream clients, many small and medium-sized motor factories in Zhejiang are undergoing power rationing and are only allowed to produce at night. This has led to a weakening of the demand for enamelled wires and a noticeable slowdown in delivery speed, which has a relatively large impact.

An enamelled wire company in Shenzhen: The company had not operated at full capacity before the implementation of the power rationing measures due to the poor orders. Currently, it is implementing 5-on 2-off schedules, which has limited impact on deliveries for orders. The power rationing has increased the cost of production, though.

The impact on copper price trends and market outlook analysis

On the whole, the impact of power rationing on the copper industry chain is the most significant on the demand side. But we shall be wary of the subsequent possible impact on some smelters in the south. If some smelters in the south continue to undergo power rationing, it is expected that the supply side will also be affected significantly. From a fundamental point of view, domestic inventories will remain at a low should there be no large inflows of imported copper, which will provide strong support for the copper prices.

Price gains during the year

LME and SHFE copper prices rose about 20%