Yunnan asks aluminum producers to reduce electricity consumption

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BEIJING, Sept 13 (Reuters) – Southwest China’s Yunnan province has ordered electrolytic aluminum producers to cut electricity consumption this week, the companies told Reuters on Tuesday.

Yunnan’s move is another sign that soaring energy prices are having a strong impact on aluminum production across the world, although domestic prices have had a limited impact so far.

Producers have been required to reduce their energy use by about 10% from their normal consumption from September 13 to 14, said officials from two producers, who declined to be named because they were not authorized to publicly discuss the order.

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The companies had already reduced power consumption by 5 percent from normal use from Sept. 10 to 12, following an order issued by the Dali Power Supply Bureau, which is part of Yunnan’s power grid.

The power cut in the southwestern province came after poor rainfall in the region this year reduced its hydropower supply, which normally accounts for 75% of its electricity.

Yunnan Power Grid declined to comment when contacted by Reuters. Dali’s power supply office could not immediately be reached.

“It affects about 10% of our capacity,” said a source at a large foundry, with an annual capacity of 900,000 tonnes of electrolytic aluminium.

Production cuts and the disappearance of hydropower’s cost advantages should provide some cost support for prices, but rising inventories also weighed on the Chinese market, said Zenon Ho, an analyst at Marex Metals.

Yunnan, with an annual operational capacity of 5.25 million tons of electrolytic aluminum, accounts for about 10% of China’s capacity.

The Shanghai Metals Market predicts China’s aluminum output in September will fall 3.4% month-on-month to 3.37 million tonnes following power rationing in Yunnan.

It is not certain that the power cuts will be prolonged. Hydroelectric production is generally low from November after the end of the rainy season.

This happened against the backdrop of growing cuts in production of the energy-intensive metal in Europe due to soaring energy prices. Read more

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Reporting by Siyi Liu and Dominique Patton; Editing by Tom Hogue, Rashmi Aich and Louise Heavens

Our standards: The Thomson Reuters Trust Principles.

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