China: Yunnan to increase power supply to aluminium smelters

Chinese experts overseeing the aluminium industry have revealed the Yunnan province is planning to increase power supply to smelters later this month, according to an international media report. This development comes as a relief for the drought-stricken region, as deficient rainfall has severely impacted hydropower generation, leading to reduced production and operating rates at smelters since September 2022.

With hydropower contributing to nearly 70% of the province's electricity supply, the situation has affected Yunnan's position as the fourth largest electrolytic aluminium-producing region in China. The province's potential production capacity is 5.25 mnt/annum of aluminium.

However, the recent increase in rainfall has helped alleviate the hydropower supply restrictions, enabling the gradual resumption of power supply to the smelters.

Initially, the aluminium smelters would be allowed to recover 20% of their paused capacity. The extent of further resumption would depend on the power availability in the future.

Su Yanbo, a researcher of electrolytic aluminium at Beijing Aladdiny Zhongying Business Consulting, estimated that power cuts in Yunnan have reduced aluminium capacity by 1.65 mnt. However, he anticipates that a resumption in power supply would recover approximately 1-1.3 mnt of aluminium output.

Despite the positive developments, concerns persist regarding the power supply for the second half of the year. This uncertainty may lead producers to slow down or delay the resumption of production.

The cost to restart a 500 KA graphitised cathode electrolyser is approximately $419,556.95, and with the current profit margin at around RMB 2,000/t ($279/t), it would take approximately eight months of stable production to recover these costs.

In conclusion, the increase in rainfall in Yunnan province has provided some relief to the drought-stricken area, allowing for a gradual resumption of power supply to aluminium smelters. While the exact details are still being determined, this development is expected to bring back a portion of the reduced capacity.

However, concerns remain regarding the power supply for the second half of the year, which may impact the pace of production resumption.

Note: This article has been published in accordance with an article exchange agreement between Alcircle and SteelMint.