Multiple Provinces Sharply Hike Electricity Prices, Packaging and Printing Industry Faces a "Must-Raise" Dilemma

The cause of this round of power rationing is mainly that soaring coal prices have caused a sharp rise in power generation costs, making power supply tight.

Recently, affected by power rationing and production limits, several provinces have adjusted electricity prices again.

At the end of September, Hunan issued a notice proposing that when the unit price of standard coal at a plant is higher than 1,300 yuan, for every additional 50 yuan/tonne the upper limit of the coal-fired thermal power trading price will be raised by 1.5 fen/kWh.

Anhui also issued a notice allowing the direct trading price of coal power to be raised by no more than 10% on top of the benchmark electricity price.

Guangdong also issued an adjustment plan: starting in October, the peak-valley price spread will widen and peak-valley electricity prices will rise by 25%.

Inner Mongolia also issued a draft for comments: for power users that participate in electricity market trading but then withdraw, the guaranteed minimum price will be 1.8 times the catalogue price.

Shandong also said that specific electricity prices will be formed by market entities such as power generation enterprises, electricity retail companies and power users through market-based means within the range of the benchmark price plus upward and downward fluctuations, with the upward range not exceeding 10%.

Zhejiang, from October 15, will optimize the time-period divisions and widen the peak-valley price spread.

Henan, from November 1, will also appropriately expand the scope of time-of-use electricity pricing and improve the peak-valley electricity price mechanism.

So what impact will the rise in industrial electricity prices have on the packaging and printing industry?

Because China's packaging and printing industry is a highly electrified and automated industry, and looking at the world, the productivity level of China's packaging and printing industry is first class—one could even say it beats European and American enterprises hands down. But electrification also means high electricity costs for enterprises; once electricity prices rise substantially, enterprises' production costs will also spiral out of control.

Let us look at two sets of publicly available online news reports to get a glimpse of how high electricity consumption is in the packaging and printing industry.

In September 2020, Shangyou News reported that Chongqing Hongjin Printing Co., Ltd. in Nan'an District, through implementing digital transformation, turned its traditional station building into a digital one, improving management efficiency, saving 50% of employee working hours, saving 150,000 yuan per year in labour costs, reducing the power consumption of the air compressor station by about 15%, and saving more than 250,000 kWh of electricity a year.

From the above data it can be seen that the annual electricity consumption of Chongqing Hongjin's air compressor station alone is as high as 1.67 million kWh, and the plant's total electricity consumption is conservatively estimated at several million kWh or more. If calculated on the basis of Guangdong's 25% increase in peak electricity prices, at 1 yuan per kWh for peak use, the electricity cost of the air compressor station alone would increase by 410,000 yuan!

Look at another news report: Chutai Packaging Co., Ltd. in Xiangyang, Hubei, has 11 production lines, a daily output of 15,000 sets, and daily electricity consumption of 14,000 kWh at full capacity. Using Guangdong's electricity prices, the peak-period daily electricity cost would increase by 3,500 yuan and monthly by 105,000 yuan.

For a packaging and printing industry squeezed by raw material costs, labour costs and environmental protection costs, hardly any enterprise can withstand a substantial rise in electricity costs.

Over the past six months, as the scissors gap between PPI and CPI has widened continuously, price inversion has already appeared in the packaging and printing industry, and enterprise operating conditions are worrying. How to relieve the worry? Only by raising prices!

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378392.html