May 22, 2018 / 4:55 AM / 7 months ago

China's Henan Shenhuo to shift aluminum smelting capacity to Yunnan province

BEIJING (Reuters) - China’s Henan Shenhuo Coal & Power Co will transfer more than 450,000 tonnes per year of aluminum smelting capacity to the southwestern province of Yunnan, according to a provincial government notice.

The move illustrates Yunnan’s increasing popularity as a location for aluminum smelters in China, the world’s biggest producer of the metal. The companies are keen to tap the province’s large hydropower capacity to replace their current coal-fired plants for the power needed during the electric-intensive smelting process.

The Yunnan Industry and Information Technology Commission said late on Monday that Yunnan Shenhuo Aluminium Co, a unit of Henan-based Shenhuo, had completed the formalities to transfer 451,100 tonnes per year of smelting capacity to the province.

This represents the first phase of a 900,000 tonnes per year two-phase integrated hydropower and aluminum smelting project Shenhuo is building in Yunnan, it said. Construction is expected to start on July 18, with production to begin in a year.

China’s Ministry of Industry and Information Technology allows smelters to move or acquire new capacity in regions that have available quotas.

“Yunnan is a hot spot,” said Jackie Wang, an aluminum analyst at consultants CRU in Beijing, noting that another Chinese smelter, Sichuan Qiya, had recently decided to relocate 350,000 tonnes per year of capacity to the province.

The Yunnan Industry and Information Technology Commission announced that transfer on May 10, saying the company was having trouble building a planned project with the same capacity in the Xinjiang region in northwest China.

Yunnan’s hydropower provides an alternative to coal-fired power generation and that will help smelters produce “green metal,” said Wang. State-run Aluminum Corp of China [ALUMI.UL] , or Chinalco, is planning to link up with existing companies in Yunnan.

Shenhuo Coal & Power could not immediately be reached for comment.

The 451,100 tonnes of capacity in Yunnan is replacing a total of 510,000 tonnes at three plants in the central Chinese province of Henan that the group has already closed down.

The first of these, a 60,000 tonne-per-year facility, stopped production in 2010 and was demolished in 2017, while the last, a 210,000 tonne-per-year plant, was only closed last month and is to be demolished in December.

Reporting by Tom Daly; Editing by Christian Schmollinger

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