Industrial Production News
- No special power rates for metals firms
Date: 16-Oct-2007 Sources: (Shenzhen Daily)
THE government will cancel preferential electricity rates for ferro-alloy and primary aluminum producers, the latest in a series of moves aimed at limiting growth in energy-intensive sectors.
The policy could hurt earnings at domestic aluminum smelters, such as Aluminum Corp. of China Ltd.
Preferential rates for ferro-alloy plants will end Oct. 20 and those for aluminum smelters will terminate by the end of this year, although in certain cases they will remain in effect until 2008, according to a circular posted on the National Development and Reform Commission's Web site.
'For some aluminum smelters that have been offered large subsidies, the subsidies will be reduced by 0.05 yuan (per kilowatt hour) in 2007 and will be canceled entirely in 2008,'the circular said.
The government initiated a policy in 2004 to charge higher power rates for plants that are heavy electricity users but the policy has not been fully implemented by local governments.
The circular, jointly issued by the National Development and Reform Commission, which is the nation's top economic planning agency, the Ministry of Finance and the power authority, demanded that local governments immediately terminate preferential policies towards the plants.
Metal smelters, long considered cornerstones for economic growth in China, have been offered preferential power arrangements by some local governments to encourage development.
Analysts said the government's tougher stance would cut profit margins at some domestic aluminum plants, although the impact would depend on how strictly local governments implement the policy.
'Aluminum smelters may pay an additional 0.02 yuan (US$0.0027) to 0.07 yuan per kilowatt hour depending on the size of their subsidies,'said an analyst at an international trading house in Beijing.
'And the termination will raise the average power costs in the industry.'
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