CHINA: Restriction on electricity use lifts domestic cement prices

From July to October, cement prices in nearly all regions of China have been soaring on declining output caused by local governments' restriction on electricity supply for energy-intensive industries.

To meet their energy-saving goals for 11th Five Years, Zhejiang, Jiangsu, Shandong, Guangxi and a dozen of other provinces adopted strictly measures to lower energy consumption. Energy-intensive industries like cement and steel become primary targets of electricity control orders.

Among all provinces, Zhejiang, a cut-throat battlefield for cement players, took the first step. The energy consumption per CNY10000 GDP for Zhejiang was planned to reduce by 3.2% in 2010, while it only lowered by 1% in the first half. Under these urgent energy-saving circumstances, local government asked all cement manufacturers to take two 15-day breaks in the third quarter.

Energy control measures in Zhejiang dragged local cement output immediately. According to China Cement Net, cement prices in Zhejiang saw five jumps in July-August period. At present, local cement prices are 20-30% higher than the second quarter. In July, cement prices in Zhejiang was about RMB250/t, but in October, only after 3 monthes, prices shot up more than 30% to RMB400/t.

Within no more than two months, following local governments' measures to meet energy saving targets, cement supply shortage speeded quickly from Zhejiang to Yangtze River Delta, the East, the South, and even inland China.

In neighboring Jiangsu province, cement output decline resulted from electricity supply control also lifted prices.

Mr. Xu Hongbin, general manager of Jiangsu Pangu Cement Company told the reporter that the government's ban on electricity supply for cement plants reduced the company's monthly output by as much as 40%.

Guangxi, another cement clinker manufacturing region, ordered 594 local cement, steel, electrolytic aluminum and zinc plants to consume 2.1 million kWh less electricity every month since September. This measure pushed regional cement prices up by 10% in the first month of the third quarter.

In Shandong, the biggest cement producing province, cement and clinker output declined for the same reason. A local retailer told the reporter from China Cement Net, the P.O. 32.5 cement price surged up by 60 yuan per ton in last 10 days as he could not get enough products to meet booming demands.