Analysis of impact of 2020-2021 heating season on aluminium and alumina industries

SHANGHAI, Nov 2 (SMM) — Many northern regions in China are about to enter the heating season, and this year is the final year of China's three-year “blue sky” action plan.

At the end of June 2020, the General Office of the Ministry of Ecology and Environment of China issued the revised edition of the "Technical Guidelines for the Development of Emergency Emission Reduction Measures for Key Industries on Heavy Pollution Days ", which clearly stipulates the performance grading and emission reduction measures of key industries during heavy pollution days.

The followings are SMM's analysis of the impact of the heating season on the aluminium and alumina industries based on relevant policies and specific measures of the "2+26" cities (Beijing, Tianjin and surrounding 26 cities). 

Aluminium industry

According to SMM statistics, a total of 11 aluminium smelters are located in the range of "2+26" city (Beijing-Tianjin-Hebei and surrounding areas + Fenwei Plain), which involves 9 cities in 4 provinces (Shanxi, Henan, Shandong and Shaanxi).

The existing annual aluminium capacity in the 9 cities stand at 10.75 million mt, accounting for 24.8% of China’s total existing aluminium capacity, while the operating annual aluminium capacity stand at 10.36 million mt, accounting for 26.6% of China’s total operating aluminium capacity.

(1) Shanxi Province: The existing annual aluminium capacity stands at 1.08 million mt. Zhaofeng Aluminium is currently classified as Category C in Yangquan’s fourth batch of performance appraisal for key industries in heavy-polluting weather in 2020.

(2) Henan Province: The existing annual aluminium capacity stands at 1.83 million mt. At present, only Wanji has been rated as Category A. The three branches of Jiaozuo Wanfang, Henan Zhongfu and Yugang Longquan have all been rated as Category B.

(3) Shandong Province: The existing annual aluminium capacity stands at 7.54 million tons (5.86 million mt at Weiqiao Group and 1.68 million mt at Xinfa Group in accordance with the documents issued by the Binzhou and Liaocheng Ecological Environment Bureau).

Both Weiqiao and Xinfa are classified as Category A.

(4) Shaanxi Province: The existing annual aluminium capacity stands at 300,000 mt. No specific policy has been issued.

Alumina industry

According to SMM statistics, a total of 27 alumina plants are located in the range of "2+26" city (Beijing-Tianjin-Hebei and surrounding areas + Fenwei Plain), which involves 14 cities in 3 provinces (Shanxi, Henan, and Shandong).

The existing annual alumina capacity in the 14 cities stand at 63.4 million mt, accounting for 72.5% of China’s total existing alumina capacity, while the operating annual alumina capacity stand at 50.51 million mt, accounting for 73.6 % of China’s total operating alumina capacity.

(1) Shanxi Province: The existing annual alumina capacity stands at 24.65 million mt, mainly in Lvliang, Yuncheng and Jinzhong.

At present, Jiaokou Xinfa, Chinalco Huaxing, and Xing'an Chemical have been rated as Category C enterprises in the performance classification of key industries of heavy pollution weather in Luliang City in 2020.

(2) Henan Province: The existing annual alumina capacity stands at 12.05 million mt, mainly in Sanmenxia, Jiaozuo, Luoyang and Zhengzhou. The current capacity utilization rate is 76.1%. The scale of production shutdowns may be similar to last year if shutdowns are based on existing production lines.

(3) Shandong Province: The existing annual alumina capacity stands at 26.7 million mt, mainly in Binzhou, Liaocheng and Zibo. Local governments have set out specific requirements for production reduction and shutdown under different weather warnings (red, orange, and yellow alerts). The production restrictions mainly target the roasting process. Transport is also subject to restrictions.

In summary, some aluminium smelters undertook large-scale overhaul or cut output in advance in response to heating season production restrictions last year. However, smelters may lack the initiative to reduce production in this year’s heating season due to high profits.

Alumina plants Shanxi and Henan keep their operating rates at low levels amid sluggish alumina prices, and high-cost capacity is also on the verge of closures. Environmental protection and losses driven production cuts are expected to ease oversupply. On the other hand, most alumina plants in Shandong have completed environmental protection transformations and report relatively stable profitability. Winter output cut policy mostly targets roasting. Therefore, the actual impact on alumina production in Shandong may be limited.

On the whole, this year's autumn and winter heating season production limit policy is similar to that of last year, and the actual implementation will largely depend on the weather conditions.

For more information, please refer to our latest edtion of  China Aluminium Weekly