Energy crisis defers China Hongqiao's plan of aluminium capacity relocation to Yunnan

On 13th October 2021, the Chairman of the world's largest aluminium producer, China Hongqiao Group stated that the company is deferring the plan to reposition aluminium capacity to Yunnan province precisely for energy restrictions imposed by the provincial government.

The Chinese aluminium giant, Hongqiao planned to relocate 2 million tonnes of capacity to Wenshan prefecture and 1 million tonnes to Honghe prefecture in Yunnan province, which is almost half of its 6.46 million tonnes authorised annual primary aluminium capacity for uncomplicated access to hydropower, a move towards green.

Hongqiao’s Chairman Zhang Bo said that they have rolled back the relocation idea due to power restrictions. However, 1 million tonnes of capacity had started in Wenshan last year.

He further added, “The rest of the move to Yunnan would still happen and the company was in communication with authorities to ‘adjust’ the plan.”

“The power crunch in Yunnan had not caused a big impact on Hongqiao's existing production there, as the move had just started to the province,” he said.

The Yunnan provincial government notified aluminium smelters using its hydropower to retain average monthly production for September-December at August volumes or lower, as the province is countering power crisis that has also swirled across China and shattered several sectors.

Ross Strachan, CRU analyst said: “Over 2.9 million tonnes per year of (Chinese aluminium) capacity have been curtailed due to power shortages and dual control measures.”

"Yunnan may have to be even more cautious as it goes forward, with possibly an extra 1 million tonnes of curtailments likely to take place there in the fourth quarter and no ramp-ups likely until the second half of 2022," Strachan added.

The Chairman also said the raw materials and the rising prices of power are propelling the production costs and energy consumption restrictions to pursue, while the associates of the industry should be ready for hardship.

Zhang concluded by saying: "I want to call for companies in the industry to maintain product prices, secure supply, stabilise prices and market expectation and authorities should avoid rushing carbon emission cuts.”