Yunnan Aluminium Co., Ltd. reduces 2021 output target by 2% to 2.36 million tonnes due to new production restrictions

Yunnan Aluminium Co., Ltd. has reduced its 2021 production target by more than 500,000 tonnes or almost 18 per cent after the local government enforced production curb for the rest of the year.

The news came after the company, which uses Yunnan’s hydropower sources for the energy-intensive smelting process, said in a filing on Thursday, September 16, that its primary aluminium output was expected to fall to 2.36 million tonnes this year.

It is down slightly from 2.41 million tonnes in 2020 but way below the initial target of the year 2.87 million tonnes announced in March.

Aluminium smelters using hydropower in Yunnan province have been asked to keep their average monthly output in September-December at August levels or lower. Following the same policy, other Chinese regions have also ordered the smelters to keep their outputs limited as they struggle with tight power supply and are under pressure to reduce carbon emissions.

"The implementation of the policy will result in a significant reduction in the company's electrolytic aluminium production from September to December 2021 compared with the production plan formulated at the beginning of 2021," Yunnan Aluminium said.

Due to this new restriction, Yunnan Aluminium will be unable to recommence its 770,000 tonnes of annual capacity and also its subsidiary will not be able to launch 380,000 tonnes of new capacity as planned.

Smelters can, however, generate some considerable profit margin as tight supply keeps aluminium prices near 13-year highs.

"A frenzied price rally means even marginal producers are making close to $1,000 for every tonne of aluminium produced," CRU senior aluminium analyst Martin Jackson said in emailed comments this week.