China¡¯s power rate cuts pose downside pressure on aluminium price

China’s power rate cuts from this month pose further downside pressure on aluminium prices, Shanghai Metals Market foresees.

China’s National Development and Reform Commission (NDRC) cut on-grid power tariffs – prices paid to power producers by the State Grid Corp. of China, effective from this month.

For instance, on-grid power tariffs at power plants run by Jiangxi Ganneng Co. were cut by 0.01 yuan/kwh to 0.4752 yuan/kwh from Wednesday, October 9.

As electricity prices which industrial consumers are charged remain unchanged, aluminium smelters using electricity from the state grid remains unchanged too.

However, a growing number of aluminium smelters in China have built self-run power plants.

Power plants are expected to argue for lower coal prices given a supply surplus of steam coal and cuts in on-grid power tariffs.

Lower coal prices would help reduce production costs at those aluminium smelters, which would translate into lower aluminium prices given the current oversupply in the market, according to SMM’s research team.

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