Events

On August 17th the NDRC published a barometer of how well the first half of the year achieved the 2021’s dual energy consumption targets for all regions,In terms of the reduction in energy intensity, in the first half of this year, the energy intensity of Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi and Jiangsu provinces (regions) increased rather than decreased, the reduction rate of energy consumption intensity in 10 provinces has not reached the progress requirement, and the situation of energy conservation in the whole country is very severe.The document requires that nine provinces (regions) where energy consumption intensity does not decrease but increases, suspend the energy-saving examination of “Two-high”projects other than major projects planned by the state this year, and urge all localities to take effective measures, to ensure the completion of the annual energy consumption double control objectives, especially the energy intensity reduction objectives.

1. "dual control" policy of total energy consumption and intensity

(1) introduction of concept

The dual control system of energy consumption, I. E. The dual control system of total energy consumption and energy intensity, sets the control targets of total energy consumption and energy intensity according to the administrative regions of provinces, autonomous regions and municipalities directly under the Central Government, and supervises and examines the local governments at all levels.The index of energy conservation should be included in the performance evaluation index system of ecological civilization and Green Development to guide the change of development concept.The key energy-using units are divided into energy consumption double-control targets, and the target responsibility assessment is carried out to promote the key energy-using units to strengthen energy-saving management.The Fifth Plenary Session of the 18th Central Committee of the Communist Party of China (CPC) put forward the action of “Double control”on the total amount and intensity of energy consumption.With the “Double carbon”strategy landing, “Double control”policy has become an important grasp of energy conservation and emission reduction, policy effectiveness is increasingly strengthened.

(2) early warning mechanism

The National Development and Reform Commission will implement a “Red, yellow and green”warning mechanism for the “Dual control”assessment of energy consumption in each province, municipality and autonomous region.Here's how:

Red Light is the first-level warning, that the situation is very serious, refers to the non-completion of the double control progress goal, and the actual value and the target value difference is greater than 10% of the target value area;

Yellow light is the second level of early warning, that the situation is more serious, refers to the completion of the double control progress targets, and the actual value and the target value within 10% of the gap;

The green light is a three-level warning, indicating the area where the double-control progress target has been achieved, indicating that progress is generally smooth.

(3) after the alert, local governments will take substantive measures

The “Double control”mechanism of energy consumption is a strict environmental regulation policy.Historically, when there is an early warning of local performance, the area is bound to use administrative controls to meet annual targets.We believe that this “Early warning-rectification-standard”trigger mechanism with the “Ecological civilization”concept of building and “Double-carbon”objectives continue to strengthen and strengthen.

On Feb. 7, the 2021 released the results of its assessment of the total energy consumption and intensity of each region in 2019, criticizing the Inner Mongolia for not completing the dual control task.The Inner Mongolia government immediately held a press conference on February 10 to set the goal of reducing the energy consumption per unit area of the 2021 by 3 percent and controlling the energy consumption increment within 500 tons of standard coal, and said to develop a “Package”policy system.On March 9, Inner Mongolia issued “A number of safeguard measures to ensure the completion of the task of double control of energy consumption in the 14th five-year plan”, clear Requirements: 1) control the industrial scale of high energy-consuming industries; 2) improve access standards; 3) accelerate the elimination of backward production capacity and other measures.

From the Inner Mongolia double-control policy of the details, the focus of regulation and control covers a variety of commodities.Some itself is the futures listed varieties, such as iron alloy, electrolytic aluminum, PVC, ethylene glycol, soda ash, Coke, some are related to the listed varieties of products, such as calcium carbide, thermal power and so on.The supply of related varieties will be reduced gradually by means of controlling the scale and suppressing the production capacity.

Obviously, Inner Mongolia as the country’s important commodity production area, its strict production capacity control to enhance the rigidity of product supply, the first half of the commodity market rose played a certain role in the promotion.At present, the economy continues to recover, demand is strong, many commodities are in tight balance or even in short supply pattern, under the high pressure of energy consumption control, local governments attach great importance to green development, energy consumption standards assessment.Thus, in the first half of the double-control performance evaluation of the poor provinces are likely to be like Inner Mongolia, the most effective way in the short term is to take measures to limit production.This feedback mechanism will further feed through to commodity markets, reinforcing expectations of tight supply.

Coincidentally, August 17 by the early warning of some provinces, also immediately on the “Double control”to the position.Guangxi Province introduced new double-control measures, requiring from September on, electrolytic aluminum, alumina, steel, cement and other high-energy enterprises to limit production, and gave a clear cut production standards.Autonomous Regions such as Xinjiang and Ningxia, which have been warned, have also made arrangements to rectify the situation.These measures will have a significant impact on products in the second half of the year.

2、Which products are affected by the dual control of energy consumption

(1) in the first half of the year, the intensity of energy consumption in the nine provinces increased rather than decreased

On August 17th the General Office of the National Development and Reform Commission published a barometer of the achievement of the dual target of energy consumption in all regions in the first half of the 2021, which pointed out that in terms of energy intensity reduction, in Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi and Jiangsu nine provinces (regions) , the intensity of energy consumption increased rather than decreased in the first half of the year, representing a first-level early warning; in the control of total energy consumption, qinghai, Ningxia, Guangxi, Guangdong, Fujian, Yunnan, Jiangsu, Hubei Eight provinces (regions) for the first-level alert.

It is concluded that Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Yunnan, Jiangsu and other seven provinces are on double-level warning of energy intensity reduction and total energy consumption.Only Xinjiang and Shaanxi provinces were given the first-level warning of energy consumption double-control reduction, proving that these two provinces have made great progress in controlling the total amount of energy consumption, but the GDP growth rate has been greatly slowed down due to the economic structural problems in the provinces, the first-level warning for the control of total energy consumption in Hubei Province may be due to the fact that Hubei Province was most affected by the epidemic before, and the will to restore the economy is more urgent, this can also be seen in Hubei’s 28.4% GDP growth in the first half of the year, which is why it launched more projects in the first half of 2021 that had previously been shelved due to the epidemic, resulting in total energy consumption falling short of the target.

  The National Development and Reform Commission (NDRC) said it would suspend the review of energy efficiency for the “Two high”projects in Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi and Jiangsu provinces, which are on the first level of warning for energy intensity reduction.The NDRC has not taken measures for the provinces (regions) that are on early warning of total energy consumption, which means that reducing energy intensity is a more urgent task at this stage.By combing the production capacity ratio of major industrial products in these nine provinces, it can be found that Non-ferrous metal, ferroalloy, PVC and soda ash will be greatly affected,According to the production capacity ratio of these nine provinces, the influence order is as follows: Ferroalloy > GT> Soda> PVC>Rebar.

 (2) which provinces (regions) are worth paying attention to in the future

  In addition to the semi-annual list of nine provinces (regions) did not meet the standard, the double control goal of marginal variation of the provinces (regions) also deserve attention.Through combing the first quarter and the half year each area energy consumption double control target achievement barometer may obtain, Fujian and Shaanxi in the energy consumption intensity reduction aspect from the second level early warning to the first level early warning;In terms of total energy consumption, Fujian, Qinghai and Ningxia changed from the second-level warning to the first-level warning, and Xinjiang, Shaanxi and Sichuan from the third-level warning to the second-level warning.The possible reason is that the six provinces in the second quarter of more production projects, is expected to be in the semi-annual early warning, follow-up capacity will slow down production.

(3) of the commodities affected by the dual control policy

  The dual control policy is mainly aimed at high-energy-consuming industries. There are six types of high-energy-consuming industries that need attention, they are: Chemical Materials and chemical products manufacturing; Ferrous and calendering; Non-ferrous metal and calendering; non-metallic Mineral Products; petroleum processing and coking; and nuclear fuel processing; and production and supply of electricity and heating.Corresponding to the listed futures, mainly Soda Ash, PVC, rebar, ferroalloy, Non-ferrous metal, glass, coke and so on, we summarized the regional distribution of production capacity of the futures.

  In February, the 2021 Inner Mongolia released a document on how to control energy consumption, which points to six measures:(1) raising the entry standards for new projects; (2) strengthening the efforts to reduce excess capacity; (3) controlling the total amount of energy consumption in some high-energy-consuming industries; (4) speeding up the pace of energy-saving technological transformation; and (5) adjusting the current trading policies in the electricity market; (6) clean up and rectify high energy-consuming projects built without approval.To sum up, it is to audit and control the high energy-consuming projects in stock, to close the projects that do not meet the requirements of energy consumption, and to raise the threshold for approval of new high energy-consuming projects, which is difficult to land in the short term.

3. Specific impact of dual control of energy consumption on commodities

  Since ferroalloy and Non-ferrous metal account for a relatively high proportion of production capacity in the nine provinces, the 2021, which published a barometer on August 17th of the achievement of the dual control targets for energy consumption in all regions in the first half of the year, said: Ferroalloy and Non-ferrous metal rose more strongly than other varieties during the day and later.Rebar steel and PVC, although subject to the domestic economic downturn, fell on that day, but in the following week, they quickly returned to the upside, generally benefiting from the supply side suppression of energy consumption.

  Looking back at the Non-ferrous metal and other industrial products after the NDRC’s dual control results in February and June this year, most of them still tend to rise.Overall, the dual control of energy consumption will suppress the supply side of some industrial products, will help its prices rise.But in the actual situation, the varieties because of their different fundamentals in the price trend will also be differentiated.For example, aluminum and zinc itself is limited by the power production of the variety, double control of energy consumption is undoubtedly pouring oil on the fire, the impact will be greater.We focus on the impact of electrolytic aluminum, iron alloy analysis.

(1) aluminum: energy consumption double control "fuel the fire", aluminum price is easy to rise and difficult to fall

  The impact of energy consumption double control on the supply side of electrolytic aluminum is undoubtedly “Pouring oil on the fire.”After the supply-side reform in 2016-2017, the ceiling of electrolytic aluminum production capacity has been fixed at about 45.538 million tons, which means that after the new electrolytic aluminum production capacity will be limited.And as carbon-neutral advances, carbon-emitting companies everywhere will be subject to stricter regulation.From the beginning of Inner Mongolia double control to Guangxi, Yunnan, and the recent double control of Energy Consumption in Xinjiang Changji had to limit the production of electrolytic aluminum plant, the new capacity is difficult to fall.

  Supply side is still the main contradiction at this stage of aluminum prices, July electrolytic aluminum production month-on-month slight decline, August electrolytic aluminum production is not optimistic.Xinjiang’s Changji has ordered five companies in the region to produce no more than 238,000 tons of aluminum a month, and Guangxi has ordered that aluminum production in September not exceed 80 percent of the average monthly output in the first half of 2021, double Control of energy consumption intensifies the tension at the supply end of electrolytic aluminum.In the early stage, Inner Mongolia, Henan, Guizhou and other electrolytic aluminum plants have reduced production, is expected to continue to limit the power supply side impact.At the consumer end, domestic and foreign electrolytic aluminum consumption showed a strong resilience, the current electrolytic aluminum inventory has been reduced to less than 750,000 tons, terminal consumption showed a strong resilience, is expected to continue to decline in inventory.In a word, the supply end of electrolytic aluminum is impacted continuously, while the downstream consumer is more resilient.The nine provinces in the electrolytic aluminum production capacity accounted for a higher, the second half of the energy consumption control pressure, is expected to help electrolytic aluminum prices rise further.

 (2) FERROALLOY: Local Energy Consumption “Double control”upgrade, supply will be tightened again

  As the main production area of ferroalloy in Guangxi and Ningxia, limiting production and limiting electricity supply will be tightened again.Since the release of the National Development and Reform Commission Energy “Double control”warning, Guangxi, Ningxia has introduced energy “Double control”program.Guangxi requires that the September output of permitted enterprises should not exceed 50% of the average monthly output in the first half of the year. Ningxia will increase its peak-to-peak production efforts, saying it will reverse the situation of ineffective energy consumption control.Guangxi, Ningxia Manganese silicon production capacity accounted for 31% of the country’s energy consumption “Double control”under the pressure of a high level of early warning, is expected to continue to tighten the supply of manganese silicon in the second half of the year, to form a strong support for prices.As for ferrosilicon, Ningxia, Qinghai and Shaanxi are the three “Double-control”first-level warning areas for energy consumption, accounting for 61% of the country’s ferrosilicon production capacity.