Key Takeaway From SMM Metal Industry Annual Conference: Evolvement Of China Aluminum Capacity 

Aluminum Supply Side: Domestic production capacity reaches maximum, industry operating rate progressively increases each year

From 2013 to 2015, domestic aluminum production capacity was in surplus, leading to industry-wide losses and low operating rates

In 2016-2017, the National Development and Reform Commission (NDRC) along with three other ministries issued document No. 656 in April: "Action Plan for Rectifying Illegal and Non-compliant Projects in the Aluminum Industry". This led to the withdrawal of illegal production capacity within the industry.

Between 2018 and 2019, with the gradual advancement of domestic aluminum capacity replacement projects, the production capacity of the domestic aluminum industry gradually recovered to around 43.2 million mt.

Since 2020, with the gradual completion of capacity transfer projects in regions such as Yunnan, the operating capacity of the domestic aluminum industry is nearing 45.5 million mt. The development of aluminum in Shandong, Xinjiang, Inner Mongolia, and Yunnan is thriving, accounting for 58% of the domestic production capacity.

With the "30·60 " carbon peak targets in place, the future prospects for low-carbon aluminum development are broad. The proportion of wind and solar power-powered aluminum production capacity in Yunnan and the western regions will continue to increase. Meanwhile, a significant amount of thermal power-based aluminum capacity in Shandong, Henan and other regions is expected to be transferred in the future.

In 2023, the domestic aluminum industry's operating rate is projected to recover upwards, leading to high production levels.

Since 2022, the supply side of the domestic aluminum industry has experienced significant fluctuations in operating capacity due to dual control on energy consumption¹ and issues with electricity supply and demand. This is especially evident in the Southwest region, where areas like Yunnan, Guizhou, and Sichuan have repeatedly experienced production stops and resumptions due to the variability of their hydropower supply. As the proportion of hydroelectric power-based aluminum in areas like Yunnan continues to rise, substantial uncertainties still exist on the supply side.

(¹Dual control of energy consumption primarily refers to the control of both total energy consumption and energy intensity. Total energy consumption refers to the sum of all types of energy consumed by various sectors of the national economy and households within a certain region over a specific period. Energy intensity refers to the amount of energy consumed to produce one unit of gross regional product within a certain period.)

By the end of August 2023, Yunnan region had essentially completed resumption of production, with only 130,000 mt awaiting resumption and another 120,000 mt of transferred capacity pending production. All other operations were at full capacity. The total operating capacity in the Yunnan region has reached 5.55 million mt, an increase of approximately 2.29 million mt since early June. The supply pressure in the southwest region will continue to be prominent. As of now, the domestic existing aluminum capacity is approximately 45.2 million mt, with the operating capacity recovering to around 42.94 million mt, up 2.52 million mt YoY.