Recently, many underground sources issued policy documents on dual control of energy consumption, and various industries with high energy consumption and high pollution have stopped production and work. News of production restrictions and upgrades in Jiangsu, Yunnan, Zhejiang and other places has even blown up the circle of friends.

 As soon as the A-share market opened the day before yesterday, the light industry manufacturing, energy and power sectors went crazy.

The direct reason for the surge in these two sectors is the curtailment of electricity and production. Jiangsu and Zhejiang provinces are China's printing and dyeing centers, and Shaoxing alone accounts for half of Zhejiang's printing and dyeing capacity. Once the Shaoxing Printing and Dyeing Plant was shut down, one-third of the country's printing and dyeing capacity went out of business.

When the supply-side capacity is limited, the price of raw materials rises sharply. The Changshu Printing and Dyeing Chamber of Commerce in Jiangsu Province issued the "Dyeing Fee Adjustment Notice", requiring member companies to uniformly increase the printing and dyeing fee by no less than 1,000 yuan/ton from October 1st.

The Sweater Dyeing and Finishing Chamber of Commerce in Tongxiang City of Zhejiang Province issued the "Letter on Adjusting the Dyeing and Processing Fees of Hank Yarns", requesting that the printing and dyeing processing fees be raised by 500 yuan/ton.

Seeing these "Price Increase Notification Letters", the first thing I remembered was the chemical industry in the second half of last year. Under strict environmental protection policies, a large number of chemical companies with high energy consumption and high pollution were ordered to suspend production and relocation. Then, the prices of chemical raw materials soared all the way and could not stop at all.

Nowadays, the state has put more emphasis on dual energy consumption control policies, resolutely controlling high-energy-consumption and high-emission items. Many regions with excessive energy consumption have begun to notify local enterprises to control energy consumption by means of power curtailment and production suspension. To a certain extent This has the same effect as the supply-side reform of chemical companies.

The reason is that the background is that the "carbon neutral" strategy has been formally incorporated into the implementation stage. Industries such as high energy consumption and high pollution chemicals, light industrial manufacturing, and coal power energy are all key industries that need to be vigorously adjusted by policies. Those who should be relocated must be relocated; those who should be upgraded must be upgraded; those that should be shut down must be shut down.

According to incomplete statistics from China Business News, as of September 23, there were more than 10 A-share listed companies that had suspended or restricted production due to energy consumption dual control and power restriction. Judging from the companies that have issued production restriction and production suspension announcements, they are mainly concentrated in Jiangsu, Zhejiang, and Yunnan. Among them, the high energy consumption industries in Jiangsu and Zhejiang are mainly concentrated in textiles and energy chemicals; Yunnan has focused on limiting the production of electrolytic aluminum and yellow phosphorus.

In terms of market performance, as of the close of September 23, coal futures were still running at a high level. The main contracts of thermal coal, ferrosilicon, and manganese-silicon futures had daily limits, and coking coal rose by more than 6%.

The power cut is essentially a shortage of coal and electricity. National coal production has hardly increased compared to 2019, while power generation is rising. Beigang stocks and coal stocks in power plants have dropped significantly. The reasons for the lack of coal are as follows:

1. In the early stage of coal supply-side reform, a number of small coal mines and open-pit coal mines with safety issues were closed, and there were no large-scale coal mines. Under the background of improving coal demand this year, coal supply is tight;

2. This year's export situation is very good. Light industry enterprises and low-end manufacturing industries have increased their electricity consumption. Power plants are large coal consumers. The high coal prices have increased the production costs of power plants and the power of power plants to increase production is insufficient;

3. This year, the import of coal has changed from Australia to other countries. The price of imported coal has risen sharply, and the price of coal in the world has also remained high.

In fact, the total amount of power generation in 2021 is not low. In the first half of the year, my country’s total power generation was 3871.7 billion kilowatt-hours, twice that of the United States. At the same time, my country's foreign trade has grown extremely fast this year.

This is due to the fact that foreign countries are affected by the epidemic and unable to produce normally. my country’s production tasks have increased as a result. It can be said that my country has almost single-handedly guaranteed the global supply of goods throughout 2020 and even the first half of 2021. Therefore, my country’s foreign trade has not been affected. The impact of the epidemic is actually much better than the 2019 import and export data.

With the increase in exports, the demand for raw materials also increases, and the demand for bulk commodity imports soars. The sharp increase in the price of steel since the end of 2020 is caused by the sharp increase in the prices of iron ore and iron concentrate. One of the main means of production in the manufacturing industry is raw materials and the other is electricity. As production tasks increase, my country's electricity demand continues to increase.

However, there are some differences between this year's electricity and production restrictions and last year's industrial reorganization. Regarding the adjustment of chemical enterprises, the Chinese government has taken a heavy blow, shutting down thousands of illegal chemical enterprises, and relocating and rectifying thousands of chemical enterprises.

However, in terms of light industry manufacturing, the main measures were to limit electricity and production, and there was no order to shut down.

Why not expand the supply of coal, but instead restrict electricity and production?

On the one hand, the demand for power generation is large, but the cost of power generation is also increasing.

In China, electric power is a public industry with strong public welfare attributes. Rising electricity prices are related to the national economy and people's livelihood, and the government will not easily increase electricity prices.

In fact, earlier this year, the National Development and Reform Commission announced that it was necessary to increase electricity prices. However, in public opinion, there are many oppositions.