Punitive Electricity Prices Implemented by Local Governments May Affect Zinc Smelters

SHANGHAI, Sept. 6 (SMM) -- Local governments have implemented punitive electricity pricing for high-energy-consuming industrial sectors as China's State Council has dispatched inspection teams to carry out inspections in 18 major provinces and regions throughout China.

The Shandong provincial government implemented punitive electricity pricing for 19 enterprises that exceeded energy consumption standards, including the coal, metallurgy, building material, chemical, and other high-energy-consuming industrial sectors.  A total of 3,100 enterprises with annual energy consumption exceeding 5,000 mt of standard coal are targeted.  According to the implementation plan, power tariffs for firms in industrial categories targeted for restriction by previous government policies will be increased to RMB 0.1/kwh, while firms in industrial categories targeted for elimination will have their power tariffs raised to RMB 0.3/kwh. 

A person from the Shandong Energy Conservation Office said they will take more stringent  measures, including power limits, water restrictions, production shutdowns, forced unit maintenance, production shifts, and elimination of inventories, in order to force power conservation.  In accordance with Central Government requirements, enterprises with high energy consumption, low profits, and poor sales are the main targets identified to meet goals set for the 11th Five-Year period.  
 
The Hebei Province Development and Reform Commission recently announced punitive power tariffs for 99 similar enterprises, with new policies scheduled to be put in place by the end of September.

Punitive tariffs have also been implemented at 18 enterprises in Handan city, Hebei province. Wu Lianjun, Director of Environment and Resources Department of the Handan Development and Reform Commission, said at a press conference on August 16th that the Handan government will increase supervision and investigate responsibilities of major industry leaders if these enterprises fail to meet requirements by the end of 2010.

Guangxi, Guizhou, and Henan provinces have now also issued strict punitive electricity policies. SMM sources report that Guangxi province plans to raise electricity prices for  industrial enterprises by 20%, with detailed standards for price adjustments scheduled for release before October.  If electricity prices are increased by 20%, production costs for zinc ingot will increase by RMB 400-500/mt and smelters will come under heavy cost pressure. Inner Mongolia will also increase electricity prices for industrial production by RMB 0.01/kwh, and production costs for zinc ingot in that province will increase by RMB 40/mt, since each  ton of zinc ingot produced consumes 4,000 kwh, which will affect zinc smelters to some extent.  

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