The impact of summer electricity on the aluminum market

Since July, hot weather has continued to occur across the country, and news of power shortages and staggered production in various industries has been reported frequently from various places. On July 14th, Henan Province issued a power rationing notice, and coal produced by coal mines is not allowed to be exported. There are also rumors in Yunnan that the power rationing notice will be issued again after the low water period at the end of May. Based on the current power curtailment, Yunnan, Inner Mongolia, and Henan provinces are selected for analysis.
Yunnan: The plan to return to normal production levels in August cannot be realized as scheduled. <br/>   The current total production capacity of electrolytic aluminum in Yunnan is 3.95 million tons per year, all of which are produced using grid electricity. After the last round of power restrictions was issued, the company responded positively, stopping tanks in parallel with reducing the load, and reducing the production capacity of about 900,000 tons/year according to the proportion of the output decline, and the company’s production reduction ratio was 25%-30%.
Since the beginning of this year, Yunnan has repeatedly reported about power curtailment and production reduction. In May, the aluminum plant’s electricity load continued to drop. In mid-July, there was a sudden shortage of coal supply. The high temperature caused the shortage of hydropower during the high water period. In addition, production capacity resumption and new investment plans have stalled. Originally, after the flood season in July, the company began to gradually resume production, but considering the tight power supply, the company was slow to resume production, and the converted production capacity was restored to about 200,000 tons/year. The unresumed production capacity reached 700,000 tons/year.
Inner Mongolia: Rising power costs have led to a decline in the willingness to generate electricity. The requirements for limited voltage production in West Inner Mongolia are still strict, and there is also a shortage of power in the east of Inner Mongolia.
Due to the shortage of power supply, several electrolytic aluminum enterprises in West Inner Mongolia have received requests for peak power consumption, reducing the power load during the evening peak power consumption period. At present, there are 6 electrolytic aluminum production enterprises in West Inner Mongolia, involving a production capacity of about 3.45 million tons/year. The total production capacity using grid electricity is 1.05 million tons/year, accounting for 30% of the total production capacity in West Inner Mongolia and 2.4 of the total national production capacity. %.
The main reason for the current power curtailment is the continuous increase in coal prices in West Inner Mongolia, which has caused power companies to become unbearable and their willingness to increase power generation has declined.
Henan: Large-scale and large-scale suspension of production of aluminum plate, strip and foil enterprises <br/>   The current staggered power rationing in Henan has little impact on the output of upstream alumina enterprises and electrolytic aluminum enterprises. However, due to the shortage of power supply, many aluminum processing companies in Henan Province were forced to cut production on July 14 due to the impact of power rationing.
Henan Province is a major province in China’s aluminum processing industry. The designed production capacity of aluminum sheet, strip and foil enterprises in Henan Province is 6.65 million tons, and the total operating capacity is 4.43 million tons, accounting for 39.5% of the country’s total production capacity. Due to the excessive load of the power grid lines, the aluminum plate, strip and foil enterprises in Henan Province were out of power and production. The large-scale and large-scale suspension of production of aluminum sheet, strip and foil enterprises in Henan Province will likely lead to a decline in local electrolytic aluminum consumption.
Impact on the futures market <br/>  The shortage of electricity supply continues. For electrolytic aluminum companies, it has further delayed the release of supply, and the marginal increase in supply has weakened. In the early stage, most of the market believed that the expectation of additional hydropower in the southwestern flood season to solve the use of electricity was broken, which is a good support for the increase in aluminum prices in the off-season.

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