Yunnan in China removes preferential electricity pricing for aluminium producers to control power consumption

Southwest China’s Yunnan province, one of the country’s largest aluminium-producing areas, has reportedly removed preferential electricity pricing for electrolytic aluminium producers to control power consumption amid shortages.

The news came after the provincial government issued a policy on Monday prescribing an immediate cancellation of power price discounts and subsidies to the aluminium industry. This will result in an increase in electricity costs, estimates Shi Fuliang, co-founder of aluminium industry research firm ALD. Shi Fuliang said the province would adopt a tiered electricity pricing system.

Yunnan used to offer preferential electricity pricing to aluminium companies at 16 per cent to 22 per cent lower than the industry average. The cost of electricity accounts for 40 per cent to 50 per cent of an electrolytic aluminium producer’s costs.

Yunnan province, known as China’s aluminium valley, has been experiencing severe power crunches this year and is striving hard to meet emission reduction targets. A large number of aluminium producers have relocated to Yunnan province due to rich hydropower resources that make electricity available at lower prices. At present, Yunnan is home to around 10 per cent of China’s aluminium capacity.

In 2020, Yunnan expanded its primary aluminium capacity by 72 per cent from the previous year to 2.6 million tonnes.