November 14, 2019 / 3:35 AM / a month ago

UPDATE 2-China Hongqiao to move about 1/3 of its aluminium capacity to Yunnan

* Company plans no winter production cuts this year

* Building a solar project in Shandong province

* Hongqiao’s capacity to stay the same (Adds details)

By Tom Daly

QINGDAO, China, Nov 14 (Reuters) - China Hongqiao Group , the world’s biggest aluminium supplier, will move almost a third of its smelting capacity to Yunnan in southwest China from Shandong province, its chairman said on Thursday, cutting its reliance on coal-fired power.

Hongqiao plans to move 2 million tonnes of capacity in two phases to Wenshan prefecture, in the southeast of hydropower-rich Yunnan province near the border with Vietnam, Zhang Bo told Reuters on the sidelines of the China Aluminum Week forum.

All of Hongqiao’s smelting capacity is currently located in the city of Binzhou in Shandong and relies on coal-fired power for the electricity-intensive smelting process. The move to Yunnan would swap coal for cleaner hydropower.

“It’s mainly to adjust the energy structure of Hongqiao, with nearly one-third of the production capacity using hydropower and clean energy in Yunnan,” said Zhang.

Hongqiao is also working on a solar power project in Shandong, he said.

The 1 million tonnes of smelting capacity in the first phase of the Yunnan project is expected to start in the third or fourth quarter of 2020.

The new plant’s electricity costs will be around 10% lower compared to what Hongqiao pays now, said AZ China Managing Director Paul Adkins.

Yunnan’s abundant hydropower resources have already attracted state-owned Aluminum Corp of China, which took over regional producer Yunnan Aluminium in 2018.

“The cost is good. Yunnan government gives us some preferential electricity prices,” said Zhang, who did not give any specific numbers.

The time frame for the second phase will depend on how the first goes, Zhang said, adding that there was no need to buy replacement capacity permits as overall group capacity will remain at 6.46 million tonnes.

Hongqiao’s home city of Binzhou is subject to special environmental curbs in China’s fight against smog.

But Zhang said Hongqiao will not cut any output this winter, having already shut some aluminium production after some of its premises were flooded in August.

Hongqiao’s production will fall by about 300,000 tonnes this year due to that incident, while the flooded capacity will be moved to Yunnan, he said.

Zhang said Hongqiao was also still studying building smelting capacity in Southeast Asia, after floating the idea of moving capacity to Indonesia, where Hongqiao produces raw material alumina, two years ago.

Zhang said Hongqiao would buy alumina from nearby areas, including in the neighbouring alumina-rich Guangxi region, for the Yunnan plant. (Reporting by Tom Daly in Qingdao, China; Writing by Mai Nguyen in Singapore; Editing by Kenneth Maxwell and Christian Schmollinger)

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