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Insight | Time: Sep 14 2021 3:09PM
VSF: How's the influence of dual control of total energy consumption and energy intensity?
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Background of dual control policy

With the continuous development of China's economy, the Chinese government starts to adopt increasingly tough measures in the construction of ecological civilization and environmental protection. In 2015, Xi Jinping-General Secretary of CPC Central Committee pointed out in the planning proposal statement of the Fifth Plenary Session that : 鈥渋mplementing a dual control system of total consumption and intensity of energy and construction land is a hard measure. This means that it is necessary to control not only the total amount but also the intensity of energy consumption, water consumption and construction land per unit of GDP.


In 2021, Xi further proposed carbon peak and neutrality goals, and the dual control policy was raised to a new height. The control of total energy consumption and energy consumption per unit of GDP has been improved again.


Operation of energy control policy

At present, the dual control policy is mainly implemented by local governments at different levels, supervised and managed by the National Development and Reform Commission, Ministry of Ecology and Environment and National Energy Administration. The supervisory department, in conjunction with local governments conducts corresponding management and control based on energy consumption indicators. For example, the recent centralized power rationing of textile enterprises in Nantong is the work of reducing energy consumption during the supervision of Jiangsu Energy Conservation Supervision Center in key areas.


It is reported that 45,000 sets of air-jet looms and 20,000 sets of rapier looms have been shut down, which will last about 20 days. Supervision and inspection is carried out in level 1 warning areas of energy consumption intensity in Huai'an, Yancheng, Yangzhou, Zhejiang, Taizhou and Suqian.


Areas affected by dual control policy

Theoretically speaking, all regions in Chinese mainland will be subject to dual control supervision, but in fact, hierarchical early-warning mechanism will be implemented in different areas. Some regions with high total energy consumption or energy consumption per unit of GDP may be the first ones being affected by dual control policy.


The National Development and Reform Commission recently announced the completion of the dual control targets for energy consumption in the first half of 2021 by region.



Note: 1. The data of Tibet has been acquired and it not included in the early warning range. The ranking is based on the reduction rate of energy consumption intensity in each region.


2. Red is level 1 warning, indicating that the situation is quite severe. Orange is level 2 warning, indicating that the situation is relatively severe. Green is level 3 warning, indicating generally smooth progress.


How does VSF industry adapt to dual control?

As industrial production enterprise, VSF companies consume a certain amount of energy during production. Due to poor profits of VSF this year, the unit GDP declines under the same energy consumption, and some VSF companies located in early warning areas may cut production along with the overall energy consumption reduction target in the region. For example, some VSF plants in Suqian and Yancheng of north Jiangsu have reduced run rates or plan to cut production. But on the whole, VSF companies operate in a relatively standardized manner, with tax payment in place, relatively large scale and self-supporting energy facilities, so there may be smaller pressure of cutting run rates versus the neighboring companies.


Dual control is currently a long-term goal of the market and the entire industry chain of viscose must actively adapt to the general direction of reducing energy consumption. At present, we can make efforts on the following aspects:


1. Use clean energy within acceptable cost range.

2. Improve the technology and continuously reduce energy consumption on the basis of existing technology.

3. Develop new energy-saving technology. For example, the energy-saving and environmental-friendly viscose fiber promoted by some Chinese companies can meet the requirements of reducing energy consumption, and the green and sustainable concept is highly recognized by consumers as well.

4. While reducing energy consumption, it is also necessary to increase the added value of products and create higher GDP based on unit energy consumption.


It is foreseeable that in the future, competition among different companies in different industries will not just be reflected in cost, quality and brand, but energy consumption is likely to become a new competitive factor.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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