Power, steel output fall for 1st time in decades in 2015

Source:Reuters Published: 2016-1-19 18:53:02

Govt remains committed to reining in industries with overcapacity


Electricity and steel output both fell in China for the first time in decades in 2015, while coal production dropped for a second year in row, illustrating how a slowing economy and shift to consumer-led growth is hurting industrial consumers.

China's economy grew at its weakest pace in a quarter of a century in 2015 and efforts to restructure have not only slashed demand but also exposed massive overcapacity in industrial sectors such as coal, steel and power.

Only crude oil escaped the downturn, with refinery throughput hitting a new record in December 2015, rising 3.8 percent to 10.44 million barrels per day in the year, data from the National Bureau of Statistics showed on Tuesday.

"Because steel mills are cutting production, it cuts demand for coal and power, and coal is also hit by falling power and cement demand. It is going to be really bad for the next five years," said Xu Zhongbo, a steel industry consultant.

China generated 5.618 trillion kilowatt-hours of electricity in 2015, down 0.2 percent from the previous year, the data showed, the first annual decline since 1968.

"China's economic growth has decoupled from coal-fired power generation, and the increase in the service industry as a share of China's GDP has also slowed demand," said Yang Fuqiang, a senior researcher at the Natural Resources Defense Council.

Yang said he expected the sector to grow at a much slower pace until 2050 as China embarks on "energy transition," and with a thermal power capacity surplus already estimated at around 200 gigawatts, China needed to stop approving new plants.

Crude steel production dropped 2.3 percent to 803.8 million tons, the first yearly fall since 1981, with the entire sector sapped by weak demand and a colossal supply glut.

Around half of China's steel mills are making losses and many are struggling to exit from a sector with a capacity surplus of 400 million tons a year, half of total production.

A construction slowdown also hurt the cement industry, slashing output by 4.9 percent and creating further knock-on effects for coal and power.



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