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Power supplies to aluminium smelters in China’s southwestern Yunnan province will be increased this month, allowing some capacities in the drought-stricken region to resume operations.
Yunnan, China’s fourth-largest producer of electrolytic aluminium, has required smelters to reduce production twice since last September, lowering operating rates by about 40 per cent in total at some companies, after unusually low levels of rainfall impacted hydropower production.
Hydropower accounts for about 70 per cent of the province’s total power supply, which has an aluminium production capacity of about 5.25 million tonnes. The shortage of hydropower has eased thanks to increased rainfall this month.
The resumption will take place in late June, although the exact amount of electricity to be resumed and the date are still being decided and will be based on weather and market demand.
An executive at a Yunnan aluminium smelter told Reuters on Monday that the company had received a verbal instruction from the power grid to prepare to restart production. They will be allowed to resume 20 per cent of the interrupted capacity, while further resumption will depend on the future supply of electricity.
The power outage in Yunnan reduced aluminium production capacity by 1.65 million tonnes. A recovery of about 1 million to 1.3 million metric tonnes is expected once the electricity restrictions are lifted.
But as concerns over electricity supply in the second half of the year persist, there will be producers who will slow or even delay the resumption of production.
Restarting a 500 KA graphitised cathode electrolyser costs up to 3 million yuan ($420,000). It would take about eight months of stable production to recover these costs, based on the current profit of about 2,000 yuan per metric tonne.
