Outlook to China’s 2020-21 heating season impact on aluminium and alumina industries: SMM

Many northern regions in China are about to enter the heating season. This year is the final year of China’s three-year “Blue Sky” action plan. So, the Shanghai Metals Market has presented an analysis of the heating season on the aluminium and alumina industries based on relevant policies and specific measures issued in June 2020 by the Ministry of Ecology and Environment of China for Beijing, Tianjin and surrounding 26 cities.

According to SMM, total 11 aluminium smelters are located in 2+26 city (Beijing-Tianjin-Hebei and surrounding areas + Fenwei Plain), which involves 9 cities in 4 provinces (Shanxi, Henan, Shandong and Shaanxi).

The existing annual aluminium capacity in those 9 cities stands at 10.75 million tonnes, accounting for 24.8 per cent of China’s total existing annual aluminium capacity. The operating annual capacity stands at 10.36 million tonnes, accounting for 26.6 per cent of the country’s annual operating capacity.

1. Shanxi Province: The existing annual aluminium capacity in Shanxi stands at 1.08 million tonnes, with Zhaofeng Aluminium smelter currently classified as Category C in Yangquan’s fourth batch of performance appraisal for key industries in heavy-polluting weather in 2020.

2. Henan Province: In Henan, the existing annual aluminium capacity is 1.83 million tonnes. At present, only Wanji has been rated as Category A, while the three branches of Jiaozuo Wanfang, Henan Zhongfu and Yugang Longquan have all been rated as Category B.

3. Shandong Province: The existing annual aluminium capacity stands at 7.54 million tonnes, with 5.86 million tonnes at Weiqiao Group and 1.68 million tonnes at Xinfa Group. Both Weiqiao and Xinfa are classified as Category A.

4. Shaanxi Province: The existing annual aluminium capacity stands at 300,000 tonnes. No specific policy has been issued.

Coming to the alumina industry, a total of 27 alumina refineries are located in the range of "2+26" city (Beijing-Tianjin-Hebei and surrounding areas + Fenwei Plain), which involves 14 cities in 3 provinces (Shanxi, Henan, and Shandong), found SMM.

 The existing annual alumina capacity in the 14 cities is 63.4 million tonnes, accounting for 72.5 per cent of China’s total existing alumina capacity. The operating annual alumina capacity stands at 50.51 million tonnes, accounting for 73.6 per cent of the country’s total operating alumina capacity.

1. Shanxi Province: The existing annual alumina capacity stands at 24.65 million tonnes, mainly in Lvliang, Yuncheng and Jinzhong.

 2. Henan Province: The existing annual alumina capacity in Henan hovers at 12.05 million tonnes, mainly in Sanmenxia, Jiaozuo, Luoyang and Zhengzhou. The current capacity utilization rate is 76.1 per cent.

3. Shandong Province: In Shandong, the existing annual alumina capacity stands at 26.7 million tonnes, mainly in Binzhou, Liaocheng, and Zibo.

To conclude, aluminium smelters are less likely to reduce production in this year’s heating season due to high profits, while alumina refineries in Shanxi and Henan may keep their operating rates subdue amidst sluggish alumina prices.