April 26, 2013
According to a report published by the China Electricity Council, Chinese electricity demand has recovered rapidly in the first quarter of 2013, due to the steady economic growth. Driven by strong growth in the steel and building materials sectors, electricity demand from manufacturing industry has increased dramatically over this past period.
A moderate increase in total electricity consumption
In the first three months of 2013, the total domestic electricity consumption grew by 12.1 Bn kWh, up 4.3% from the same period last year. Figure 1 provides a breakdown of the total domestic power consumption by each sector of the economy; the biggest being the manufacturing sector, at 868.8 Bn kWh, it accounted for around 70% of the total electricity used during this period. The service sector only accounted for 12% of the total power consumption; however, having grown 9.2% yoy, its consumption rate grew over three times faster than the other two sectors.
Figure 1: Electricity Consumption by Sectors of the Economy (1Q2013)
Source: China Electricity Council
Regional electricity consumption
Looking at the consumption growth of the individual regions and provinces, the Xinjiang province experienced the highest growth in the past 12 months. This is caused by the rapid economic development of that region in the past few years, from the support of newly mandated economic development policies put forth during the 12th Five-Year Plan. Through which, central and local governments pledged to invest 3.6 Trillion RMB in infrastructure projects, including the development of highways, railroads, civil aviation hubs and water conservation projects. These new projects will prove to be a significant boost for the iron and steel industry. To meet this new demand, the development of additional steel plants is already underway; upon the completion of these projects, the output capacity of Xinjiang’s steel industry is expected to reach 40 Mn ton by the end of 2015.
Figure 2: Key Electricity Consumption Growth in Select Regions
Source: China Electricity Council
With Xinjiang’s electricity consumption growing at a record pace since April 2012, the province has become the top electricity consumer in China. To help meet this new wave of demand, local electricity producers have rapidly scaled-up their operations. Currently, Xinjiang’s power grid is the second largest in China; with a large number projects still to be implemented, the total investment in Xinjiang’s power grid is expected to hit another new record this year.
Other high electricity consumption growing areas as shown in Figure 2 are all located in the Northwest and Southwest. Many energy consuming industries and other heavy industries, such as aluminum electrolysis, are moved to the west as the pollution standards become stricter and costs are rising.
Rapid increase in electricity consumption from top industries
In the first quarter of 2013, the industries with the highest of electricity usage rates in China are the smelting, chemical and building materials sectors; together they have consumed 247.7 Bn kWh, accounting for 31.4% of China’s total electricity consumption.
The smelting industry tops the list as the largest electricity user, at 84.7 Bn kWh, accounting for 8.9% of total usage. The growth in power consumptions from non-ferrous metals smelters also grew the most during this period. Looking at the chemical industry, electricity consumption in this industry will also grow in the upcoming periods. With prices of chemical products having been on a steady rise since January and with strong demand growth from the peak season for agrochemical products during the summer months, output in this industry will remain strong in the upcoming months. Another key driver of growth for the chemical industry stems from the preferential treatments by local governments, in their plans to drive local economic growth by promoting the expansion of output capacity of local chemical industries. Consumption growth in the building materials industry is turning back into positive territories, and this upward is also expected to continue. With the combined electricity consumption these top industries reaching 42.3% of the total usage in the first quarter of 2013 and given the promising outlooks in the key industries, the total electricity consumption rate will likely grow in the upcoming months.
Forecasting the future for China’s power industry
According to data published by the China Electricity Council, the new installed capacity for 2013 is expected to reach 87 Mn kWh, with 40 Mn kWh coming from thermal power. With industrial electricity consumption expected to continue to increase in the upcoming years, mostly caused by the expansionary fiscal policies implemented by the new central leadership; new generation capacity will continuously be added to the grid in the coming years to meet this increasing demand from these new infrastructure investments used to promote continued economic growth.
About GCiS China Strategic Research
GCiS (www.GCiS.com.cn) is a China-based market research and advisory firm focused on business to business markets. Since 1997, GCiS has been working with leading multinationals in sectors ranging from technology to industrial markets, medical, chemicals, resources, building and constructions and a few others.