Power Tariff Cuts to Slow Retirement of China High-Cost Aluminum Capacity

SHANGHAI, Apr. 13 (SMM) – China’s State Council decided last week to cut power rates for industrial and commercial users by an average 0.018 yuan ($0.00294)/Kwh. 

 

Some 70% of China’s operational aluminum capacity relies on captive power plants and are thus unaffected by these tariff adjustments, SMM understands. Smelters that source power directly from power plants will similarly be unable to benefit from these tariff cuts. It remains to be seen whether those that have already been receiving preferential power rates will qualify for the tariff cuts.   

 

Aluminum smelters that do qualify for the tariff cuts are already suffering from high production costs, with 20% of China’s operational aluminum capacity suffering losses in cash costs at current prices, SMM data showed. Therefore, this cut in power tariffs will slow the retirement of loss-making, outdated capacity.