At around 3:15pm on 22nd of September, Shandong Yankuang Keao Aluminium arranged a full stop on its rectifier unit for its potlines. It meant Keao formally shut down all aluminium production lines.
Yankuang Keao Aluminium was established in 2002 and it started production in November 2003. From that time to last week, the plant totally produced a total of 1.55 million tonnes in 13 years.
On 22nd of July, Keao planned to start shutting down its 140Kt aluminium plant and they planned to complete the shut down process by the end of August. At the time, they feared running into massive operating losses. Their power cost was RMB0.43/KWH. Even when the aluminium price runs at RMB13, 000/ton, they still could not achieve a profit.
But they did not count on the role that their electricity consumption plays in their local area. They had shut about half their pots when the parent company stepped in and halted the shutdown process. The smelter accounted for around 1/4 of Jining’s (the nearby city) electricity. Without proper planning, the National Grid and the local industries would have had a major impact.
On 22nd of September, Keao finally chose to formally shut down the plant. They were running with 97 pots. They will shut down 9 pots each day. They planned to continue running its 80Kt carbon and light alloy production.
Since 2008, Keao faced the macro control, surplus supply, structural reform, low aluminium price and high cost problems. They suffered losses for years. When I visited Keao this May, the officers in aluminium department were worried about their plant situation.
Although it is only a small plant in a province with many millions of tonnes of capacity, the closure of this plant will have an immediate impact on local industry. They will be forced to buy from one of the big smelters such as Hongqiao. Satellite industries and local suppliers will also be impacted.
When I visited Keao, the staff there were very nice and we were welcomed to visit their plant. It is quite sad to know it is shut down now. Our view is that the shutdown of backward production capacity might not be a bad thing to Chinese aluminium market. We only wish the shut down process will be smooth for Yankuang Keao Aluminium and that the employees there will find new jobs.
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