December 03, 2008

China enforces regulations for excessive power consumption

It is reported that the Government of Inner Mongolia Autonomous Region of China has raised from September of 2008 the fee for industrial consumption of electric power by CNY0.07 per 1 KWH and, at the same time, decided the policy with an aim to regulate the industries to consume excessive volumes of electric power by means of restricting its productions and shrinking these scales.

This decision has clarified the basic policy to adjust the industrial composition in Inner Mongolia, having concentrated on such industries as ferroalloys and silicon carbide which consume excessive volumes of electric power to produce these items. It is understood that, on an opportunity which fee of electric power has been raised to a large extent, Inner Mongolian Government has expressed their positive intention to materialize energy saving and to achieve this duty.

Inner Mongolia Autonomous Region has become the Mecca to produce ferroalloys in China and, when the measures to shrink the production have permeated into Inner Mongolia, this matter will spread over a substantial influence on the market. Inner Mongolia Autonomous Region has shared 17.6% of the whole production of ferroalloys in China and taken the first position. Therefore, Inner Mongolia was one of the districts, having rather positively invited industries to consume excessive volumes of electric power in the past 10 years. Accordingly, new regulations for the industries to consume excessive volumes of electric power are not negligible to put a considerable influence on exports of Chinese ferroalloys, in addition to that on domestic market of China.

It is hard to expect that this basic policy as adopted by the Government of Inner Mongolia Autonomous Region immediately exhibits concrete effects. However, when the measures enforced by the Government of Inner Mongolia Autonomous Region have been based on various policies being implemented by the Central Government of China, representing the programs to achieve target for energy saving, these measures are thought to put an impact on production of ferroalloys in Inner Mongolia as a body blow.

The measures announced and enforced by the Government of Inner Mongolia Aut. Region to achieve the purpose for energy saving are summarized as follows

1. The plan to restrict productions of ferroalloys and silicon carbide is maintained. The excessive quantities stipulated but produced are imposed by the penalty. The industries to consume larger volumes of energy in Hohhot Province, Baotou City and Erdos City have to be reduced their production by 30% in 2009. Other districts have to start to reduce their production by 20%. The Inner Mongolia Autonomous Region endeavors to select in principle the enterprises to produce ferroalloys and silicon carbide. In accordance with the program to reduce these productions as set up at the beginning of 2008, the Inner Mongolia Electric Power Corporation will supply electric power and any excessive supply of electric power is not allowed.

2. The Inner Mongolia Autonomous Region has raised fee of electric power by CNY0.07 per 1 KWH from September of 2008 and, depending on an effect of this fee raise, will consider increasing again the fee. This treatment is expected to restrain a sudden increase of production in this kind of industries. The industries to produce ferroalloys and silicon carbide have been promoted to shift and upgrade its industrial composition to produce higher value added commodities.

3. When it is necessary to cope with the movements of energy demand in July to September quarter of 2008, the productions of ferroalloys and silicon carbide in November to December will be suspended or restricted.

4. In consequence of these adjustments of industrial composition, the scales of capacities to produce ferroalloys and silicon carbide are shrunk, putting a substantial influence on local monetary situation, and the Government of Inner Mongolia Aut. Region will manage these difficulties by means of supplementing financial assistance. Also, the Government of Inner Mongolia Autonomous Region will obtain a support from the Central Government of China and, at the same time, endeavors to be granted with a subsidy.