The Yunnan government is easing off on power usage restrictions later this month, which is likely to boost aluminium output in the region according to sources claiming knowledge of the situation.
The region has been struggling through drought in recent months, which has prompted the fourth-biggest aluminium producing region to cut aluminium capacity on two separate occasions since the fall.
The historically low rainfall totals have resulted in reductions in aluminium capacity of up to 40-percent for some companies in the region since September. Around 70 percent of Yunnan’s 5.25 million metric tons are powered by hydropower.
A source claiming knowledge of the situation told Reuters that relief from power restrictions is on the horizon.
“Now the conditions allow, we will gradually resume [power supply].”
The unidentified source told the reporting agency that an increase in rainfall will result in more power available to aluminium smelters later this month. The source, who spoke on condition of anonymity, was unable to provide an exact date or amount, as those details have yet to be worked out.
Meanwhile, a second unidentified source working as a manager at a Yunnan aluminium smelter told Reuters that the firm has received oral authorization to plan for an increase in production. The unnamed source said that they should prepare to increase production by 20 percent in the short term, with greater increases to be allowed later depending upon the available power supply.
Beijing Aladdiny Zhongying Business Consulting analyst Su Yanbo told Reuters that so far Yunnan has cut 1.65 million metric tons per annum of aluminium production capacity since autumn.
“But as concerns over power supply in the second half of the year linger, there will be producers slowing down or even delaying production resumption.”
Su noted that restarting a 500 KA graphitized cathode electrolyzer costs about CN¥3 million (US$419,556.95) and takes about eight months of steady production to cover the costs of restarting.
