• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 36 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 22 hours How Far Have We Really Gotten With Alternative Energy
  • 1 day Bad news for e-cars keeps coming
  • 9 days For those of you who are full of __it.
What’s Next for Copper Markets?

What’s Next for Copper Markets?

Copper prices have experienced significant…

Surging Commodity Prices Re-Ignite Inflation Fears

Surging Commodity Prices Re-Ignite Inflation Fears

Surging commodity prices are boosting…

What's Behind the Recent Rally in Copper Prices?

What's Behind the Recent Rally in Copper Prices?

The surge in copper prices…

Metal Miner

Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

More Info

Premium Content

Power Shortages Disrupt Aluminum Production In South China

  • Southern China's Yunnan province is experiencing a power supply and water shortage.
  • Aluminum smelters in the area have had to cut production and consider moving overseas.
  • The crisis could potentially impact the global aluminum price.
Aluminum

Via AG Metal Miner

China’s aluminum production faces a “touch and go” situation once again. In this case, the problem is mainly due to a power supply crisis in the southwest area of the country. The Yunnan province, the aluminum manufacturing hub of southern China, is reducing production of the metal due to a severe water shortage. This shortage has, in turn, hampered the area’s hydroelectric power supply. Currently, the impact this will have on the global aluminum price remains unknown.

According to reports, the hydroelectric electricity generation capacity in the area is down significantly. In response, the provincial leaders sent a notice to Yunnan Aluminum last month telling the company to reduce its power consumption, which could impact the aluminum price index. Yunnan Aluminum is a major smelter location in the province, though far from the only one. Thus far, the province has requested that aluminum smelters cut production on three different occasions since last fall: by 10% in September, then by 20%, and, most recently, by 40%.

This problem comes at a time when China is still recovering from COVID-19 restrictions. Moreover, the country continues to stand on the cusp of renewed economic recovery. If successful, many experts believe this recovery will result in higher demand for metals like aluminum.

China’s Role as Lead Consumer and Producer Sure to Affect Aluminum Price

Manufacturing activity in the world’s second-largest economy continued to expand at the fastest pace in more than a decade in February. Incidentally, China is both the world’s largest producer and consumer of aluminum. As such, both positive and negative news from the country can dramatically affect aluminum price points.

According to the General Administration of Customs, China imported a record 374,321 tons January-February this year. This represented an increase of 11.3% from a year earlier, underlining just how much pressure China has on the gas pedal.

Despite this, the global aluminum price during these two months made imports unattractive. For instance, the benchmark aluminum contract on the London Metal Exchange registered a monthly average of US $2,644 a ton in January, the highest since May 2022. This was soon followed by a slide to an average of $2,373 a ton in February.

According to Reuters, the bulk of China’s imports came from Russia. Indeed, imports from Russia more than tripled in the two months, with a 266.2% surge.

Get all the news on shifts in the aluminum price index as well as other valuable commodity information. Sign up for the free weekly MetalMiner newsletter here

China May Decide to Shift Production Overseas

With provinces like Yunnan facing yet another energy crisis, China’s main aluminum smelters continue to consider shifting some of their capacity overseas, mostly to Indonesia. A report by SandP Global said the move, if adopted, would come at the right time for China. Indeed, Indonesia plans to ban the export of key raw material bauxite starting this June.

Last year, China accounted for about 59% of global primary aluminum production. Though the country’s authorities capped aluminum production at 45 MTA, it very nearly touched that figure last year. This year, some experts forecast demand to be much higher and the aluminum price index to fluctuate. This could either mean a step up in aluminum production or an increased reliance on imports.  

Of course, reduced rainfall and the subsequent water cuts are not helping the industry. Already, there is talk of more power shortages throughout the rest of 2023. What’s more, Yunnan’s efforts at using clean energy need to be sustained this year. Otherwise, that, too, could affect aluminum production. For now, shifting smelters abroad seems to be a good option.

ADVERTISEMENT

By Sohrab Darabshaw

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News