What’s new: Southwest China’s Yunnan province, one of the country’s largest aluminum-producing areas, scrapped preferential electricity pricing for electrolytic aluminum producers to control consumption amid power shortages.
The provincial government issued a policy circular Monday stipulating an immediate cancellation of all power price discount and subsidies to the aluminum industry.
The policy means aluminum companies in Yunnan will face an increase in electricity costs, said Shi Fuliang, co-founder of aluminum industry research firm ALD. The province will adopt a tiered electricity pricing system, Shi said.
The context: The southwestern province suffered severe power crunches this year and is struggling to hit its emission reduction targets.
Yunnan has become known as China’s aluminum valley amid a massive relocation of aluminum producers attracted by the region’s low electricity prices reflecting rich hydropower resources. Yunnan is home to around 10% of China’s aluminum capacity.
In 2020, the province added 2.6 million tons of capacity, up 72% from the previous year and driving up power consumption. The nonferrous metals industry accounted for 51% of power usage.
Yunnan’s preferential electricity pricing for aluminum enterprises was 16% to 22% lower than the industry average. The cost of electricity accounts for 40% to 50% of an electrolytic aluminum producer’s costs.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (hello@caixin.com)
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