Since its inception in 1953, China's aluminium industry has developed from scratch and grown from small to large, ultimately making China the world's largest aluminium producer. Throughout this process, the formation and evolution of the capacity ceiling reflect the complex interplay between China's industrialisation process, industrial policy adjustments, and sustainable development. The development of China's aluminium industry can be divided into four stages:
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1. Initial stage (1953-2001): New China rebuilt the Fushun Aluminium Plant with Soviet assistance, laying the foundation for China's aluminium industry. By 2001, China's annual aluminium production reached 3.42 million tonnes, making it the world's second-largest producer.
2. Early unrestrained growth (2002-2012): With the acceleration of industrialisation and urbanisation, demand for aluminium surged. The cancellation of the aluminium export tariff in 2002, coupled with falling international alumina prices, stimulated rapid capacity expansion.
Meanwhile, growth in domestic infrastructure and real estate investment drove aluminium consumption. In 2003, the State Council issued its first document to curb overcapacity, but policy enforcement was limited, and the industry remained in an extensive development phase. Domestic aluminium production was only 4.4 million tonnes in 2002 but jumped to 17.8 million tonnes by 2010, with an average annual growth rate of nearly 20 per cent.
During this period, the export tax rebate rate was reduced from 15 per cent to 8 per cent in 2004, and a 5 per cent tariff was added in 2005, curbing export-oriented capacity expansion. Simultaneously, domestic bauxite supply was insufficient, with import dependency exceeding 50 per cent, leading to rising costs per tonnes of aluminium.
In 2007, China's aluminium output accounted for over 30 per cent of global production, but overcapacity led to severe price fluctuations and narrowed profit margins for enterprises. The aluminium industry was hit by the financial crisis in 2008, causing the capacity utilisation rate to decline continuously, with over 1 million tonnes of capacity shut down that year.
Overall, serious problems prevalent throughout this early stage included high energy consumption (approximately 14,000 kWh of electricity per tonnes of aluminium), high pollution (fluoride emissions accounting for 30 per cent of the global total), and overcapacity (capacity utilisation rate below 75 per cent in 2009). Extensive capacity expansion after 2011 led to losses across the entire industry (2012-2016), with the capacity utilisation rate remaining below 80 per cent.
3. Supply-side reform sets a red line (2013-2017): Existing capacity increased from 30.32 million tonnes to 41.64 million tonnes, while annual production rose from 24.95 million tonnes to 36.30 million tonnes, with growth rates consistently around 10 per cent. In 2013, the State Council issued the "Guiding Opinions on Resolving Severe Overcapacity Conflicts," which for the first time proposed total control of aluminium capacity. In 2017, four ministries jointly launched a special campaign, clearing nearly 32 million tonnes of illegal and non-compliant capacity, and established a ceiling for aluminium capacity at around 45.50 million tonnes.
This policy effectively curbed disorderly expansion through a "capacity replacement" mechanism (where building 1 tonne of new capacity requires retiring 1 tonne of old capacity). The policy formally set a red line of 45.50 million tonnes for aluminium capacity, eliminated 6 million tonnes of illegal capacity, and strictly controlled new capacity. In the same year, green transformation began to take shape, with Yunnan initiating capacity replacement leveraging its hydropower resources. By 2018, the share of hydropower-based aluminium exceeded 20 per cent.
4. Deepening Constraints of Green Transformation (2018–Present): Existing capacity increased from 42.12 million tonnes to around 45.50 million tonnes, while annual production rose from 36.09 million tonnes to 43.12 million tonnes (as of the end of 2024), and the capacity utilisation rate gradually climbed to over 90 per cent. As carbon peaking gained momentum, the domestic ceiling for aluminium capacity became more firmly established.
The 2024 "Action Plan for Energy Conservation and Carbon Reduction in the Aluminium Industry" requires strict implementation of aluminium capacity replacement, stipulating that new and expanded aluminium projects must meet benchmark energy efficiency levels and Class A environmental performance standards, while new and expanded alumina projects must achieve advanced levels of mandatory energy consumption limits.
By the end of 2025, the share of recycled metal supply is expected to reach over 24 per cent, and the proportion of direct alloying of liquid aluminium is targeted to increase to over 90 per cent.
Also by the end of 2025, the share of aluminium capacity meeting or exceeding benchmark energy efficiency levels is expected to reach 30 per cent, and the proportion of renewable energy usage is set to exceed 25 per cent. The 2025 "Implementation Plan for High-Quality Development of the Aluminium Industry" further proposes raising the share of aluminium capacity above benchmark energy efficiency levels to over 30 per cent, increasing the proportion of clean energy usage to over 30 per cent, and achieving a comprehensive utilisation rate of over 15 per cent for newly generated red mud.
New aluminium capacity replacement projects must meet requirements such as an AC power consumption for liquid aluminium not exceeding 13,000 kWh per tonne and Class A environmental performance. The use of 500 kA or larger pots is encouraged, along with the relocation of aluminium capacity to regions rich in clean energy and with available environmental and energy capacity. Efforts will also focus on strengthening research, demonstration, and application of disruptive technologies such as low-carbon smelting.
In the long term, China's aluminium capacity will be driven by multiple factors including policy constraints, energy transition, technological breakthroughs, and market demand, exhibiting a core trend of "strict total control, structural optimisation, and quality leap."
1. Rigid constraints on total capacity, with optimisation of existing capacity becoming the main theme. From 2025 to 2030, the average annual growth rate of capacity is expected to be less than 0.5 per cent, with production growth mainly relying on technological upgrades of existing capacity and improved adaptability to green electricity. Capacity in traditional coal-power-aluminium provinces such as Shandong and Henan is gradually shifting to green electricity-rich regions like Yunnan and Inner Mongolia.
2. Accelerated green electricity substitution, fundamental transformation of the energy structure. Under the "dual carbon" goals, the aluminium industry is undergoing a revolutionary shift from "coal dependence" to "green electricity dominance": by 2025, the mandatory green electricity consumption ratio in the aluminium industry is set to exceed 25 per cent, rising to 30 per cent by 2027.
Hydropower bases in Yunnan and Sichuan already achieve over 80 per cent green electricity usage through the "aluminium-power integration" model, while Inner Mongolia and Xinjiang are exploring integrated pathways of "wind-solar-storage + aluminium" leveraging large-scale renewable energy bases.
3. Speeding up substitution with secondary aluminium, formation of a circular economy system. With the advancement of "urban mining" projects, the recycling rate is expected to exceed 70 per cent by 2030, forming a closed loop of "aluminium scrap recycling - smelting - deep processing." The target for secondary aluminium production is set to exceed 15 million tonnes by 2027.
4. Deepening technological iteration, comprehensive enhancement of industry competitiveness. Technological innovation will drive the aluminium industry's transformation from "high energy consumption" to "high technology." The proportion of large prebaked pots of 400 kA and above has exceeded 90 per cent, while 600 kA+ ultra-large pots have achieved scaled application, increasing single pot capacity by 30 per cent and reducing land use by 20 per cent.
5. Intensified international competition, strengthened voice in the global supply chain. China's aluminium industry is shifting from "scale expansion" to "value output." Enterprises such as Chalco and Weiqiao are investing in bauxite and aluminium projects in Guinea, Indonesia, and other countries, building a chain of "overseas resources - domestic processing - global sales."
6. Policy stimulus package in effect, continuous optimisation of the industry ecosystem. Policy regulation will run through the entire transformation process of the aluminium industry, strictly controlling capacity in key air pollution prevention areas and encouraging cross-regional capacity replacement.
The long-term transformation of China's aluminium industry is, in essence, a systematic restructuring of the energy mix, production methods, and industrial ecosystem. Through the substitution of green electricity, recycling, technological breakthroughs, and global deployment, the industry will not only safeguard national resource security but also provide a "Chinese solution" for the low-carbon transition of energy-intensive industries worldwide, ultimately achieving a historic leap from a "large aluminium-producing country" to a "strong aluminium-producing country."
The transformation of China's aluminium capacity is by no means a "minor adjustment within the industry," but rather a "multi-dimensional strategic initiative" that serves the national "dual carbon" goals, ensures energy and resource security, supports the upgrading of the manufacturing sector, and facilitates participation in global governance.
At its core, it involves transforming a traditionally energy-intensive industry into a modern, "low-carbon, efficient, and high-value-added" sector. This not only paves the way for China's industrial transformation but also offers a "Chinese model" for the sustainable development of energy-intensive industries globally, ultimately achieving resonance between "industrial upgrading" and "national strategy."
Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.
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