Yunnan aluminium smelters resume operations, eyeing 500,000 tonnes capacity increase

Industry experts stated on Monday that aluminium smelters in China's southwestern province of Yunnan are restarting factories due to improved power availability. This development is expected to result in the restoration of approximately 500,000 tonnes of annual production. In November, smelters in this region, the fourth-largest producing area in China, were instructed by China Southern Power Grid to reduce operations due to reduced hydropower supply during the dry season.

A Yunnan producer, who preferred to remain anonymous as they are not authorized to speak with the media, revealed that on Saturday, the grid operator informed producers of an allocation of an additional 800,000 kilowatt-hours (kWh) of power to the aluminium industry. As a result, smelters in the region are now increasing their operations, according to the same source.

China Southern Power Grid could not immediately be reached for comment on Monday. "The latest power reward is likely linked to less power transfer from Yunnan to other provinces," said Su Yanbo, an aluminium analyst at Beijing Aladdiny Zhongying Business Consulting, who expects the increased power availability could restore about 530,000 tonnes of annual capacity in Yunnan.

According to the forecast by Shanghai Metals Market (SMM), approximately 520,000 tonnes of capacity is expected to be added in Yunnan. This province typically transfers a portion of its electrical output to Guangdong province, a significant industrial hub in the south.

In 2023, Yunnan produced 4.47 million tonnes of primary aluminium, which accounted for 11 per cent of China's total aluminium production, as reported by Aladdiny data. The province faced challenges in 2022 due to drought and low water levels, leading to requests for aluminium producers to reduce output. This move sparked concerns about supply in the world's leading aluminium producer and contributed to global price volatility.