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September 26, 2017

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Taiwan likely to benefit from China power outages

Taiwan's cement and steel shares are likely to benefit from China's power restriction measures, local analysts said yesterday.

The measures have been extended to 18 industries across 18 Chinese provinces, as China struggles to reach its energy conservation and carbon reduction goals, according to media reports.

The power outage will last anywhere between one and three months, with the aim to force certain steel and cement manufacturers with high power consumption to close down, reports said.

The first wave of restrictions was applied to Jiangsu, Zhejiang, Hebei and Shanxi Provinces. Another round of restrictive measures will be announced for 18 industries in 14 provinces. The industries will include metal, coal, glass and textiles, in addition to cement and steel.

China has announced a major initiative to lower carbon emissions and energy consumption by 20 percent by the end of the year. A reduction of 14.38 percent was registered during the previous four years, media reported.

The power restrictions are likely to lead to a shortage of cement and steel, and manufacturers are expected to raise prices, analysts said.

Cement manufacturers do not have inventories and are likely to raise prices immediately, analysts said, adding steel manufacturers are expected to do the same as their inventories have been on the decline.

Taiwan Cement yesterday closed at NT$32.8, an increase of 2.5 percent, and China Steel rose 1.1 percent to 32.1. The TAIEX rose 2.54 percent to 8,091.3.

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