Guangxi Encourages Aluminium Smelters to Resume the Production through Financial Subsidy

SHANGHAI, Nov 21 (SMM) - Recently, Guangxi province has outlined measures to promote the growth in some key industries, involving the aluminium industry. In order to encourage aluminium smelters to accelerate their potline restarts and boost their capacity utilisation rates, smelters whose potlines were shut down this year due to the pandemic or energy-saving technological transformation are eligible for subsidies as long as they restart their potlines and achieve an increase in their capacity utilisation rates as required in the fourth quarter. A subsidy of 2 million yuan will be granted to smelters whose capacity utilisation rate increases 15-20 percentage points quarter-on-quarter (QoQ) at the end of the fourth quarter, 3 million yuan for an increase of 20-30 percentage points, and 5 million yuan for an increase of more than 30 percentage points. Guangxi will also support aluminium smelters to carry out energy-saving transformation through new process, new technology and green low-carbon technology, and these projects shall be included in the government-funded enterprise technical transformation programme. After the introduction of the incentive plan, the production resumptions of local aluminium smelters have accelerated.

Since 2021, aluminium smelters in Guangxi have been runing at low capacity. Some smelters were shut down for technical transformation, while the commissioning of new capacity was slow. In February 2022, Guangxi Baikuang Aluminium’s Tianyang branch experienced an emergency shutdown due to the sudden outbreak of COVID-19 again, sending the operating aluminium capacity in the province to below 1.63 million mt. In the second half of 2022, aluminium prices pulled back from highs, putting smelters in Guangxi under mounting cost pressure as they relied heavily on thermal power, which is more expensive than hydropower. Hence, the production resumptions of smelters slowed down. As of the end of October, the compliant installed aluminium capacity in Guangxi stood at 2.79 million mt, accounting for 6% of the total capacity in China, while the operating capacity stood at 2.12 million mt, leaving 665,000 mt of idled capacity waiting to be resumed. From January to October, the aluminium output in Guangxi fell 15% YoY to 1.59 million mt, accounting for just 4.8% of China’s total output. If aluminium capacity is resumed as scheduled, the operating aluminium capacity in Guangxi is estimated to return to around 2.75 million mt by the end of March next year.