Will the Cancellation of Preferential Power Tariff in Inner Mongolia Impact New Energy Market?

SHANGHAI, Sep 6 (SMM) - On September 1, the official website of the Development and Reform Commission of the Inner Mongolia Autonomous Region issued a notice to cancel the preferential power tariff policy.

The Notice stated that in order to strictly implement the requirements of the National Development and Reform Commission to cancel the unreasonable preferential power tariff policy, and to do a good job in the rectification of the problems found in the National Audit Office’s 2021 energy saving and emission reduction audit and the second round of feedback from the central environmental protection inspectors, with the approval of the people’s government of the autonomous region, it is now officially decided that preferential powe tariff policy be cancelled.

1. The preferential power tariff policy for strategic emerging industries implemented by the Western Mongolian Power Grid and the reverse-tiered transmission and distribution electricity policy for the large-scale industrial electricity consumers of the Eastern Mongolian Power Grid will be cancelled.

2. Other preferential power tariff policies that are not in conformity with this Notice shall be revoked accordingly. After the above preferential power tariff policy is cancelled, the new policy will be implemented in strict accordance with the current electricity price policy of the country and the autonomous region.

Electricity - the main cost of graphite anode

The artificial graphite anode material is made by calcining needle coke, petroleum coke, pitch coke and other raw materials at a certain temperature, and then pulverising, classifying, and graphitising at high temperature. Anode graphitisation is a high energy consumption industry, and electricity accounts for about 50%-60% of the cost.

Industrial distribution

Therefore, graphitisation capacity is mostly located in areas with relatively rich power resources, such as Inner Mongolia, Sichuan, Shanxi, Yunnan. Among them, Inner Mongolia has the most outstanding electricity price advantage, and has become an important production base for domestic anode graphitisation, accounting for about 46% of the country's total capacity.

Market trend forecast

The third quarter ushered in the concentrated release of graphitisation capacity. With the increase in the self-supply rate of graphitisation by anode manufacturers and the increase in the capacity of independent graphitisation manufacturers, the supply tightness of graphitisation has gradually eased, and the price has been slightly lowered by about 2,000 yuan/mt. According to SMM Price, the current mainstream transaction prices of anode graphitisation is between 25,000-26,000 yuan/mt. According to the theoretical production expansion rhythm announced by the companies, and based on the calculation of terminal battery demand, the supply and demand of artificial graphite will reach a tight balance in the fourth quarter, and the graphitisation price is expected to decline significantly.

Policy analysis

However, the cancellation of preferential power tariff policy in Inner Mongolia has lifted the electricity price by about 0.1 yuan/kWh to about 0.5 yuan/kWh. According to estimates, the cost of graphitisation of anode will increase by about 1,400 yuan/mt. Coupled with the upcoming People's Congress, the possibility of power cuts in Inner Mongolia is high, and the graphitisation production may be limited again. Therefore, SMM believes that the prices of anode graphitisation are expected to stabilise at a high level in the fourth quarter.