Ukrainians cut power consumption 4%, production 3% in 7M13

Макроэкономика 13.08.2013 Ukrainian consumers decreased electricity consumption 4.1% yoy to 106.2 TWh in 7M13, the Energy Ministry reported on August 12. The key categories responsible for the decline were the machinery (-10.0% yoy to 3.1 TWh) and chemical industries (-13.4% yoy to 3.2 TWh). The biggest industrial consumer of power, Ukraine’s steel industry, decreased its consumption 7.3% yoy to 20.3 TWh. Those raising power demand were agricultural companies (+3.9% yoy to 2.3 TWh) and households (+1.1% to 24.1 TWh). Electricity production decreased only 3.4% yoy in 7M13 as power demand from abroad (exports increased 11% yoy to 5.9 TWh) partially offset the decline in domestic demand. The key export destination in 7M13 was Hungary, which increased demand for Ukrainian power 26% yoy to 2.5 TWh. The biggest electricity sources, nuclear and thermal power plants, decreased power output by more than 7% yoy each in 7M13, while key sources that raised power output were hydro (+47% yoy) and green (+110%) producers. Alexander Paraschiy: The power consumption data suggests the Ukrainian industrial sector is still in a deep stagnation: the 7M13 industrial consumption decline (-7.6% yoy, in line with the 6M13 decline) implies that industrial output in 7M13 will be no higher than in 6M13 (-5.3%). The decrease in industrial power consumption effectively increases the electricity tariff burden for industries, as they have to pay more to subsidize individual consumers. In particular, the share of total electricity consumption by households and the housing sectors (already subsidized by industry) rose to 40.6% in 7M13 (vs. 39.0% a year before). On the positive side, a decline in electricity production from fossil fuels (as opposed to nuclear and hydro) has nearly stopped as thermal power producers showed only a 0.6% decline yoy in July vs. -8.6% in 1H13. That raises hopes for a quick recovery in power output by thermal GenCos, which might stimulate a recovery in demand for Ukrainian coal to the benefit of domestic miners.