There are only seven aluminum smelters located in Guizhou province at present. Two of those are state-owned enterprises and the rest are private. All run at relative small capacity, now they are facing different fates.
The Guizhou government issued a final closure plan for outdated capacities last week. Two smelters have to close by the end of this year, namely Guizhou Weiming Aluminium with capacity of 32ktpa and Guizhou Anshun Huangguoshu Aluminum with capacity of 45ktpa. The latter is running 85KA technology, which was outlawed some years ago. Almost at same time, Chalco Guizhou, Guizhou Zunyi Aluminum and Yulong smelters told the market, they will restart operations, with total capacity of 325ktpa coming back into the market.
There are several possible reasons to encourage restarting I think. The industrial electricity price in Guizhou province is relatively high compared with other regions, and energy supply is another limiting factor. We heard from the market, Guizhou government will give a tariff concession to the restarted smelters, some RMB0.13/Kwh, bringing the price to RMB0.45/Kwh roughly. In addition, the government has a capital of RMB80-120 million available for smelters’ restarting.
In order to overcome higher electricity price and short energy supply, the government is going to promote construction of captive power plants of domestic smelters in the future. I estimate the cost of electricity will reduce to about RMB0.3/Kwh if they run captive power plant but it depends on installed capacity and utilization rate.
Domestic alumina prices went down to a large extent in last couple of months due to holding higher inventories at producers. Two large components of operating costs have decreased as the market shifts to a bullish view, stimulating the smelters’ interest in restarting.
Editor’s note: plants running at 85KA have no place in the 21st century, and it’s about time someone in China forced these plants out. Paul Adkins.
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