Silicon Metal Plants in Yunnan’ Dehong Prefecture, One of Production Hubs, to Face Power Rationing

In September 2023, there were rumors in the market that aluminum production in Yunnan region may be facing a reduction, but local aluminum enterprises were operating steadily. By the end of September, the operating capacity of aluminum enterprises in the province had reached around 5.65 million mt, while the operating capacity of silicon metal was around 1.4 million mt.

On October 27, 2023, relevant departments of Yunnan province and aluminum-related departments held a joint meeting to discuss the power consumption situation during the dry season. Insider sources revealed that, considering the long duration of the dry season and the demand for industrial electricity in the coming year, local aluminum enterprises are expected to reduce production by 22%.

On October 30, 2023, SMM learned that the proportion of aluminum production reduction in Yunnan has been basically determined. The four aluminum smelters will reduce capacity by 9%-40%, and some may lower productions soon. The total capacity reduction is estimated to be 1.15 million mt.

On the afternoon of October 30, it was reported that relevant departments of Dehong Prefecture in Yunnan province, along with silicon metal-related departments, held a joint meeting to discuss the power consumption situation during the dry season. Starting from November 1, six rounds of power rationing will be implemented. According to information obtained by SMM, during this round of power rationing, the entire province of Yunnan must ensure a daily load limit of either 1.5 million or 3 million kilowatts, while Dehong Prefecture must ensure a daily load limit of either 70,000 or 140,000 or 200,000 kilowatts. The specific details of the power rationing measures will be determined by the local governments. Official documents regarding these measures have not been published yet. If the rumored version of the plan is executed rapidly, it is estimated that the production in November may be affected by around 5,000 mt. However, for silicon furnace production, frequent start-stop operations can lead to abnormal furnace temperature and rapidly deteriorating furnace conditions. According to feedback from silicon enterprises, if such start-stop operations are implemented, there is a high possibility of having to completely halt production after three rounds, resulting in a larger-than-expected impact on production.

According to SMM data, Yunnan's silicon metal production from January to September 2023 was 495,000 mt, down 13% YoY. Among them, production in September was 91,000 mt, up 1% YoY. SMM has learned that some silicon enterprises in Dehong Prefecture and parts of Nujiang have planned to proactively shut down furnaces and reduce production on the evening of October 31. On the one hand, the electricity price at midnight on that day increased by about 0.12 yuan/kWh MoM, resulting in a cost increase of over 1000 yuan/mt. On the other hand, due to the recent downturn in silicon prices and rising costs, the profitability of silicon enterprises has declined. Some silicon furnaces with poor production volume may incur losses after adjusting the electricity price. When paying attention to the opening situation of silicon enterprises in the Sichuan-Yunnan region, in addition to electricity supply, it is also necessary to pay attention to the reduction in production caused by the expected losses after the electricity price adjustment.