Caixin
Sep 14, 2021 04:44 AM
ECONOMY

Yunnan Tightens Aluminum Production Curbs in Green Push

Aluminum reached $3,000 a ton in London for the first time in 13 years
Aluminum reached $3,000 a ton in London for the first time in 13 years

Southwest China’s Yunnan province told local smelters to slash aluminum production 30% for the rest of this year to help meet goals for reducing energy use and greenhouse gas emissions.

Yunnan has become a preferred location of aluminum smelting projects and other nonferrous metal refiners in recent years because of its abundant hydropower. In 2020, the province added 2.6 million tons of aluminum capacity, up 72% from the previous year and driving up power consumption. The province originally planned to put an additional 1.4 million tons of aluminum capacity into operation this year.

By allocating to Yunnan and using local hydropower, aluminum projects become greener, and the province is transitioning from a green power supplier to an aluminum supplier. But the added power usage strained the province’s own supply, and forced it to cut the power supply in May.

The provincial government issued a circular Friday ordering strict controls on emissions and energy consumption by local industries. Producers of green aluminum, or low-carbon aluminum, should cap average monthly output between September and December below August levels, the statement said.

Aluminum reached $3,000 a ton in London for the first time in 13 years, reflecting investors’ growing concerns over policy risks affecting supplies from China to Europe, according to Bloomberg. In China, the metal surged as much as 5.4% to the highest since 2006.

Yunnan province, one of the largest aluminum-producing provinces in China, already took measures to curtail local aluminum output under the pressure of power shortages. In May, the provincial energy bureau ordered aluminum companies to reduce power consumption by 25%. The order, which was supposed to be lifted by the end of June, has remained in place.

In August, Yunnan’s aluminum producers ran at 70.57% of capacity, down 25 percentage points from the same period last year, according to Kunming Power Exchange Center. The overall operating capacity of major industrial power consumers in the province dropped 14 percentage points to 56.4% in August.

Nevertheless, Yunnan is still under great pressure to meet energy goals. In the first half, the province’s energy consumption and energy intensity —

the amount of energy used to produce a given level of output or activity — remained among the highest in the country.

Last month, the National Development and Reform Commission (NDRC), the top economic planning body, cited nine provinces for excessive energy consumption, including Yunnan, Qinghai, Guangdong and Jiangsu.

The NDRC criticized local authorities for failing to meet carbon reduction commitments. Carbon dioxide is one of the most important greenhouse gases causing climate change. The commission ordered provinces including Yunnan to suspend any new projects with high energy demands except for certain major national projects.

Yunnan’s total aluminum capacity reached 4.48 million tons a year, accounting for 10% of the national total, according to commodity industry information provider Baiinfo. With current control measures, Yunnan’s aluminum production is expected to reach 3.22 million tons this year, 8% of the national total.

According to the provincial government, six major industries in Yunnan consumed nearly 70 billion kilowatt-hours of electricity in the first seven months this year, up 19% from a year ago. The nonferrous metals industry accounted for 51% of the power usage.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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