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China Ups Electricity Price For Outdated Steel Plants

Jan 10, 2017

China has toughened its tiered electricity pricing to deter outdated steel producers and advance capacity cuts, the top economic planner said Tuesday.

The measure, effective since Jan 1 this year, will raise the extra price paid by "outdated" steelmakers by 66.7 percent to 0.5 yuan (about 7 cents) per kWh, according to the website of the National Development and Reform Commission (NDRC). Outdated steelmakers are those scheduled to be phased out.

Producers that have not met capacity-cut goals on time face the same penalty as those to be phased out, while those in the "restricted" category will continue to face an additional 0.1 yuan per kWh of electricity.

Local authorities are allowed to expand the price gap even further, the NDRC said.

Since 2004, the NDRC has implemented a three-tier pricing system for eight major energy-intensive industries, including steel-making, categorizing the players as "encouraged," "restricted" or "outdated."

The incentive is considered conducive to the country's capacity cuts and supply-side reform.

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