Higher power costs to make survival harder for Chinese aluminium smelters

Chinese aluminium smelters, already battered by multi-year low aluminium prices , will find it even harder to survive as the latest policy will add to their power costs.

China’s Ministry of Finance issued a notice on collection of industrial enterprise restructuring special fund, mainly targeting power plants and companies with captive power plants, effective January 1, 2016.

Aluminium smelters, big users of power, will bear the brunt. SMM statistics found about 75% of China’s aluminium capacity relies on captive power.

The notice does not cover companies in some regions, such as Xinjiang and east Inner Mongolia, though. Those in Shandong will be required to pay 0.0139 yuan/Kwh, according to the notice, which equates to a 200 yuan/tonne increase in costs for local aluminium smelters; when and how to implement the policy will vary from region to region.

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