Feb. 4, 2026 - In 2026, the deepening market-oriented reforms in China's power sector continue, with "the abolition of fixed time-of-use electricity prices" emerging as a core industry focus. Many regions have intensively rolled out supporting policies, aligning with national-level guidance documents. This reform is set to have a profound impact on major industrial electricity consumers such as fused magnesia, brown fused alumina, and white fused alumina. The production of these products is highly reliant on electricity, with power costs constituting a significant portion of their production expenses. The gradual implementation of a market-oriented electricity pricing mechanism undoubtedly poses new challenges to the cost-control capabilities of related manufacturers.

The core of this power reform lies in clarifying the pricing boundaries between the government and the market. It does not eliminate time-of-use pricing but transfers the authority for setting time-of-use electricity prices from the government to the market. On December 17, 2025, the National Development and Reform Commission and the National Energy Administration jointly issued the "Basic Rules for the Medium- and Long-Term Electricity Market" (Development and Reform Energy Regulation [2025] No. 1656). This document clarified that, effective March 1, 2026, business entities directly participating in electricity market transactions will no longer implement government-approved fixed time-of-use price levels and periods. To date, the reform is accelerating, with policies officially implemented in nine provinces/municipalities: Guizhou, Hebei (primarily the Hebei South Grid), Hubei, Shaanxi, Jilin, Yunnan, Chongqing, Liaoning, and Henan. Adjustment plans in Jiangsu and Shanxi provinces are still in the public consultation stage, indicating an expanding scope of the reform.

As core raw materials in the refractory industry, the prices of fused magnesia, brown fused alumina, and white fused alumina are directly linked to production costs and product pricing. The development of this industry is closely tied to electricity price trends. Before the reform, related enterprises could rely on government-set low-valley electricity prices to effectively reduce power costs through off-peak production. After the reform, time-of-use prices will be determined autonomously by market supply and demand. While price troughs may form during midday periods of high photovoltaic output, price fluctuations during peak electricity consumption periods could intensify. This will likely lead to increased short-term uncertainty in corporate electricity costs, significantly squeezing the profit margins of enterprises that have long relied on fixed low-valley prices to maintain profitability.

Looking at actual market performance across regions, the impact of electricity price fluctuations on enterprises in different areas is gradually becoming apparent. In Liaoning, electricity prices dropped by about RMB 0.05/kWh in January. However, near the end of the month, the State Grid operational expense price increased by RMB 0.06/kWh. This short-term volatility makes it difficult for local enterprises to adapt quickly and indirectly constrains the fused magnesia market, where price increases remain weak. In Henan, electricity price hikes exceeding RMB 0.1/kWh have directly increased production costs for local brown and white fused alumina by RMB 100-200 per ton. Yet, the pressure to pass on these increased costs downstream is hindered – due to weak downstream demand in metallurgy, building materials, and other sectors, as well as extended payment cycles, the increased product prices struggle to gain acceptance from purchasers. Consequently, production halts among brown and white fused alumina manufacturers in Henan have noticeably increased this month. In contrast, markets in Shanxi, Guizhou, and Shandong have remained relatively stable without significant fluctuations for now.

In the long term, the electricity market reform will compel related enterprises to optimize their electricity usage and enhance their capabilities in electricity market trading. Enterprises in regions like Yunnan and Guizhou, which previously leveraged local electricity price advantages to lower production costs, will need to shift their strategies post-reform. This involves actively participating in electricity market bidding or negotiating prices with power generation companies, flexibly adjusting production schedules to adapt to market price fluctuations and reduce electricity costs. Simultaneously, as price volatility increases, the value of flexible resources like energy storage and virtual power plants will become more prominent. Some large enterprises with strong financial capabilities may gradually invest in energy storage facilities to mitigate cost risks associated with price fluctuations. This will also raise industry entry barriers, driving the concentration of industry resources towards dominant players.

From the perspective of national policy direction, the marketization of electricity prices is an inevitable trend for industry development. This reform not only tests corporate cost management capabilities but also forces energy-intensive industries like fused magnesia, brown fused alumina, and white fused alumina to accelerate their transformation and upgrading. It pushes them to improve energy efficiency and emission reduction levels, practice green and low-carbon development requirements, and achieve high-quality industry development.