Aluminium giant China Hongqiao to move more smelting capacity to Yunnan - sources

* Hongqiao relocating aluminium capacity to use more hydropower

* Plans to move extra 1 mln T from Shandong to Yunnan - source

* Move would put almost half its smelting capacity in SW China

May 14 (Reuters) - China Hongqiao Group, the world’s top private sector aluminium producer, plans to move more smelting capacity from its base in industrial Shandong to the hydropower-rich province of Yunnan, two sources with knowledge of the matter said.

Hongqiao committed in 2019 to moving around 2 million tonnes of annual capacity from Shandong in eastern China to Yunnan’s Wenshan prefecture in the southwest to allow easier access to a cleaner power source than coal for the energy-intensive aluminium smelting process.

The first phase of the Wenshan project started up last September, but now Hongqiao, conscious of China’s pledge to peak carbon emissions by 2030, aims to transfer another 1 million tonnes, this time to the neighbouring prefecture of Honghe, one of the sources said.

That would mean 3 million tonnes - almost half Hongqiao’s 6.46 million tonnes of licensed annual primary aluminium capacity - will be located in Yunnan, whose popularity with smelters in China is reshaping the aluminium landscape.

The second source confirmed the Honghe plan but was unsure how much capacity would be moved. Neither source provided a timeframe for the move and both declined to be identified as the plans are not yet public.

Hongqiao declined to comment.

Business registration portals in China show a company named Yunnan Honghe New Material Co was established on April 27 under the ownership of Yunnan Hongqiao New Material Co, with registered capital of 12 billion yuan ($1.86 billion).

It is described as being in the non-ferrous metal smelting and processing industry.

Only state-run Aluminum Corp of China, known as Chinalco, can produce more aluminium than Hongqiao, via the combined capacities of subsidiaries Chalco and Yunnan Aluminium, which itself has a smelting project in Honghe that uses hydropower.

It is difficult for aluminium producers in China to win approval for new smelting projects due to strict capacity controls, but the government does allow some transfers to other regions provided overall capacity quotas are not exceeded.

($1 = 6.4361 Chinese yuan renminbi)

Reporting by Tom Daly; Additional reporting by Min Zhang and Beijing Newsroom; Editing by Jan Harvey