The first batch of aluminum production resumption in Yunnan is expected to be implemented [SMM Analysis]

According to the latest SMM survey, Yunnan Province’s external power transmission capacity has declined recently, and the province’s wind, solar and other power supplies are better, and there is a surplus of power in the province. The Yunnan Provincial Government and relevant departments encourage industrial electricity use. 800,000 kilowatts of load power will be released in the near future for the resumption of production of aluminum smelters in the province, equivalent to an annual aluminum production capacity of about 520,000 mt. There are no accurate documents yet to disclose the specific amount of production resumed by each smelter, and companies have reported that they may restart in the near future.

Review of previous situation: In early November 2023, Yunnan Province entered the dry season, and the power supply became tight. Local industrial electricity consumption reduced to varying degrees. Among them, aluminum smelters in the province managed energy efficiency accordingly, and the production reduction involved a total production capacity of about 1.17 million tons. Since the end of November, Yunnan's operating aluminum capacity has dropped to about 4.48 million mt. In 2023, Yunnan's aluminum production will reach 4.36 million tons, a year-on-year increase of 3.8%. Due to the late restart of production this time, the contribution to output in the first quarter of 2024 will be small. SMM predicts that Yunnan's aluminum output in the first quarter of 2024 may reach about 1.12 million tons, a year-on-year increase of 22%.

SMM brief comment: According to feedback from relevant companies, companies may start resuming production this week. The current domestic aluminum price is relatively high. According to SMM data, the complete cost of the aluminum industry in Yunnan Province in February 2024 is about 17,116 yuan/ton, and the industry’s average profit is about 1,700 yuan/ton. The profits declined compared with the rainy season when electricity prices are low, the enterprise’s enthusiasm for resuming production is acceptable. If the resumption of production continues until the end of the year, then the enterprise's restart costs can basically be recovered. SMM will continue to pay attention to the power supply and demand in the province.