China's Yunnan imposes output curbs on aluminium, steel, cement makers

(Reuters) - Southwest China’s Yunnan has told “green” aluminium smelters - those using the province’s hydropower as their electricity source - to keep average monthly output for September-December at August volumes or lower, a government document shows.

FILE PHOTO: Aluminium ingots are seen outside a warehouse that stores London Metal Exchange stocks in Port Klang Free Zone, outside Kuala Lumpur, March 23, 2015. REUTERS/Olivia Harris/File Photo

The province, which has been missing energy consumption targets and suffering from power shortages, also ordered its cement industry to cut September production by more than 80% from August, according to the document reviewed by Reuters and verified by three industry sources.

Yunnan produced 129.85 million tonnes or 5.5% of China’s total cement output in 2020.

As of August, Yunnan aluminium smelters had already shut down nearly 1 million tonnes of annual capacity due to power curbs, state-backed research house Antaike said earlier this month. The restrictions began in May as the province was hit by a drought that cut its hydropower output.

Yunnan is home to around 10% of China’s aluminium capacity.

London aluminium prices rose to $3,000 a tonne for the first time since 2008 on Monday. Shanghai aluminium climbed as much as 5.1%, also hitting a 13-year high. [MET/L]

For September to November, companies in fertiliser, basic chemical materials, coal processing and ferroalloy sectors with energy intensity above the industrial average levels will also be asked to curtail production, said the document from the Yunnan Development and Reform Commission dated Sept. 11.

Energy intensity - the energy consumed per unit of economic growth - measure the energy efficiency of a region. Beijing has warned two-thirds of China’s provinces and territories for missing their intensity targets in the first half of the year.

Yunnan firms whose energy consumption is one-to-two times higher than the industrial average level will have to cut output by half, said the document, and those that consume more than twice the average will need to shut 90% of their operations.

Yunnan province will also reduce the operational hours of coal-fired power plants, according to the document. It did not say by how much these plants should curb operations.

Yunnan depends on hydropower for 75% of its electricity, but output from hydro plants is typically weak in the winter season.

The province, which makes about 2.3% of China’s total crude steel, also outlined production curbs for this sector.

The local government asked Yunnan steel mills to adjust production schedules while ensuring that its 2021 crude steel output falls, according to the document.

Part of the planned September crude steel production would be postponed to the last two months of the year, it said.

The Yunnan Development and Reform Commission did not immediately answer calls seeking comment.

Reporting by Tom Daly, Min Zhang and Muyu Xu; Writing by Shivani Singh; Editing by Louise Heavens and Tom Hogue