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After the second quarter aluminum prices are expected to usher in a weak market

May 10, 2023
A Seasonal fluctuations of hydropower continue to affect the electrolytic aluminum production capacity in Yunnan
Under the background of the comprehensive implementation of the supply-side structural reform, the "double carbon" policy and the dual control of energy consumption, Yunnan Province has gradually become a major province with new electrolytic aluminum capacity due to its abundant hydropower resources. Hydropower in Yunnan Province presents seasonal fluctuations. From December to April each year is the local dry season, and the power generation in this period only accounts for one third of the annual total. Generally, hydropower fluctuations can be reduced by means of "more dry season and less dry season". The shortage of water and electricity supply in dry season is also becoming more prominent.
The data showed that Yunnan's power generation in 2022 was 374.794 billion kW, up 9.13 percent year on year. Among them, hydropower generation was 303.882 billion kW, up 11.87% year on year, accounting for 81.08%; Thermal power generation was 45.914 billion kW, up 1.54 percent year on year, and basically unchanged from 45.217 billion kW in 2021, accounting for 12.25 percent. It can be seen that hydropower is still the main power generation contribution in Yunnan, while thermal power and new energy still account for a relatively low proportion.
Since 2013, Yunnan Province has been vigorously developing hydropower resources. By the end of 2022, Wudongde and Baihetan hydropower stations with an installed capacity of over 10 million kW have been put into operation successively, marking the completion of the world's largest clean energy corridor on the Yangtze River and the completion of a large national hydropower base. By 2025, there are no large-scale hydropower stations planned or under construction in Yunnan, and there will be almost no new hydropower installations in the next few years. In addition, according to the Reply to the Opinions of the Comprehensive Department of the National Energy Administration on the absorption of Baihetan Power Station, 10 billion KWH of electricity of Wudongdong and Baihetan power stations will be retained in Yunnan and Sichuan respectively during the dry season, and the remaining electricity will be sent to the eastern region for consumption according to the original planning. According to the "14th Five-Year Plan" Cloud Power Delivery Framework Agreement to Guangdong and "14th Five-Year Plan" Cloud Power Delivery Framework Agreement to Guangxi signed in December 2021, on the basis of the 13th Five-Year Plan, Yunnan Province will add power supply to Wudongde Power Station. During the 14th Five-Year Plan period, Yunnan Province plans to supply power to Guangdong and Guangxi by 145.2 billion KWH annually. Among them, the planned power of cloud power to Guangdong is 123.3 billion KWH, and the planned power of cloud power to Guangxi is 21.9 billion KWH. That means that while Wudongde and Baihetan together could generate 100 billion kilowatt-hours of electricity a year, Yunnan Province will only get 10 billion kilowatt-hours.
In terms of installed new energy, in March 2023, Yunnan Province issued the Notice of Yunnan Provincial Development and Reform Commission and Yunnan Provincial Energy Bureau on Further Standardizing Development Behaviors to Accelerate the Development of photovoltaic power Generation. Among them, according to the annual construction plan, the provincial Energy Bureau and the states (municipalities) shall, according to the project maturity and network connection conditions, and according to the annual construction scale of no less than 15 million kW from 2023 to 2025, arrange the construction time sequence of the projects in the provincial project database and propose the annual photovoltaic construction plan. According to the plan, based on the average utilization of solar power generation equipment in Yunnan Province of 1200-1300 hours, the total power generation in Yunnan Province will be increased by 60 billion to 65 billion KWH by 2025. Without taking into account the increase in thermal power hours, in theory, an average of 15 billion to 16.25 billion KWH of new photovoltaic power generation will be generated annually from 2023 to 2025.
B Calculation of the production ceiling of electrolytic aluminum in Yunnan from 2023 to 2025
The average power consumption of electrolytic aluminum in Yunnan Aluminum industry is about 13200 KWH/ton (the average power consumption of liquid aluminum AC power industry is 400 KWH/ton lower); Yunnan Shenhuo and Yunnan Hongtai both use the latest technology and have relatively low energy consumption. The average power consumption per ton of aluminum is about 13,200 degrees Celsius. In 2022, Yunnan Province produced 4.202 million tons of electrolytic aluminum, consumed about 55.466 billion KWH of electricity, and sent 143.648 billion KWH of electricity from west to east. In 2022, the power consumption of other power users except electrolytic aluminum in Yunnan Province is about 175.676 billion KWH (total generating capacity is 374.79 billion KWH -- aluminum consumes 55.466 billion KWH -- power from west to east is 143.648 billion KWH). Assuming that its electricity consumption increases at an average rate of 5% in the next three years, the theory can support the output of electrolytic aluminum of 4.67 million tons in 2023, 5.11 million tons in 2024 and 5.51 million tons in 2025. It can be seen that according to the current planned installed capacity, the power generation scale in Yunnan Province will still be unable to meet the current capacity of electrolytic aluminum in full operation before 2025.
It is further estimated that during the first three months of this year, Yunnan Province has produced 921,900 tons of electrolytic aluminum. Theoretically, in the remaining three quarters, Yunnan Province's operational capacity can be restored to the level of 5 million tons, that is, the maximum production capacity can be restored to the level of 1.7 million tons. However, according to the installed capacity data of new energy released by Yunnan Electric Power Association in the past half year, the newly installed capacity is less than 2 million kW, indicating that the installed capacity of photovoltaic is very slow or difficult to meet the planning level, and it is also difficult to support the theoretical ceiling output of electrolytic aluminum. It is roughly estimated that the capacity of 1 million tons can be supported to resume production.
In summary, the author believes that the existing power and long-term planned installed level in Yunnan Province is still difficult to meet the growing demand for electricity. Although the alternating of wet season and dry season leads to power shortage and voltage limited production situation will still appear in stages, the interference degree to the electrolytic aluminum supply is expected to decrease year by year as the installed capacity of new energy continues to make up.
C How to solve the dilemma of limited voltage production faced by high power consumption capacity
There are four large electrolytic aluminum smelting enterprises in Yunnan Province, namely Yunnan Aluminum, Yunnan Shenhuo, Yunnan Hongtai and Yunnan Qiya, with a total built capacity of 5.26 million tons (as specified) and a current operating capacity of 3.3 million tons. At present, Yunal, Shenhuo and Qiya have a cumulative production limit ratio of more than 40%, while Yunnan Hongtai, a subsidiary of Weiqiao, has the lowest production limit ratio of less than 9%. The second round of production limit has not been affected, but Weiqiao Group's planned production capacity in Yunnan Province is close to 4 million tons. Among them, all 2.03 million tons of Hongtai's production capacity has been completed, but the current operating capacity is only 860,000 tons, and the remaining 1.93 million tons of Honghe Prefecture's production capacity is still difficult to land.
On the one hand, the power load problem is normalized and the scale index of aluminum plant reduction is set. According to the announcement of the Implementation Plan of Yunnan Province for Promoting the Aluminum Industry to Accelerate the Improvement of energy Efficiency Level and Promote the Green and Low-carbon Transformation Development (Trial) (Draft for Comments) issued by Yunnan Development and Reform Commission, it is clearly pointed out that the energy efficiency management of electrolytic aluminum industry needs to be implemented. Load management scale is determined according to primary aluminum flow direction, industrial chain extension, equipment level, energy efficiency level, emission level, production safety and other factors of electrolytic aluminum enterprises, including four indicators, one additional item and one deduction item.
Specifically, the four indicators refer to the industrial chain extension index accounting for 60% of the weight; The weight of energy efficiency level index is 15%; Equipment level index accounted for 10% of the weight; Pollutant emission index accounted for 15% of the weight; Additional points refer to the aluminum processing projects under construction in Natong; Deduction items refer to the occurrence of safety production accidents, abnormal load dumping and violation of dispatching discipline in electrolytic aluminum enterprises that affect the safe and stable operation of power grid. Electrolytic aluminum enterprises have not implemented the load management scale determined by the provincial power operation dispatching task force.
On the other hand, electrolytic aluminum enterprises are encouraged to participate in the construction of power sources and the guaranteed supply of thermal coal. The management scale of load reduction can be appropriately determined by the special task force of provincial electric power operation and dispatching according to the output of the construction of power sources and the contribution of thermal coal guaranteed supply of the electrolytic aluminum enterprises. Electrolytic aluminum enterprises and power generation enterprises are encouraged to independently trade the coal-fired power generation capacity exceeding the annual power generation plan, and the electricity whose traded price is more than 20% above the benchmark coal price is excluded from the scope of load management. If a coal-fired power generation enterprise still has power generation capacity beyond the completion of its annual power generation plan, electrolytic aluminum enterprises shall be encouraged to purchase coal from other provinces through their own channels and negotiate with power generation enterprises to process coal for power generation.
D Domestic electrolytic aluminum overall in a state of oversupply
Data released by information agencies show that, following the expansion of production cuts in Yunnan in February, which led to the reduction of the country's electrolytic aluminum operating capacity to less than 40 million tons, the last two months showed a sustained recovery growth. On the one hand, reduced production capacity in Guizhou, Sichuan and Guangxi has gradually resumed. On the other hand, new capacity in Inner Mongolia and other places is also being released. By the end of April, domestic electrolytic aluminum production has resumed and production capacity has reached 1.2 million tons in total, which is equivalent to the capacity space of Yunnan Province in the future, which also means that the impact of Yunnan's production cut on domestic supply side is decreasing. Up to now, the completed capacity of domestic electrolytic aluminum has reached 45.25 million tons (including the capacity that has been built and not put into operation), and the operating capacity is close to 41 million tons. The national operating rate of electrolytic aluminum is about 89%. It is expected that with the resumption of production capacity in Yunnan in the third quarter, the operating capacity of domestic electrolytic aluminum will reach the highest level or exceed 42 million tons.
On the downstream demand end of electrolytic aluminum, foreign aspects, although the Federal Reserve interest rate hike is coming to an end, but the high interest rate environment will continue to suppress economic activities, overseas consumption prospects are not optimistic, and under the conflict between Russia and Ukraine, Europe and the United States boycott Russian aluminum products is strong, the future Russian aluminum will continue to flow into the domestic pressure, aluminum ingot imports or year-on-year growth. Domestically, the traditional "gold, silver and silver" peak season consumption has passed, but there is no strong consumption increase of electrolytic aluminum. With the gradual completion of the "Baojiaobuilding" project, under the background of historically low new construction area and low development investment data, the real estate completion data in the second half of the year is likely to weaken again, thus dragging down the demand for real estate end aluminum. However, the emerging demand brought by the new energy sector remains bright. Photovoltaic, new energy vehicles, ultra-high voltage, etc., continue to provide incremental demand for aluminum, but it is still difficult to make up for the reduction brought by the traditional sector. The author believes that the annual domestic electrolytic aluminum slight surplus view is maintained, the surplus range is about 300,000 tons, the aluminum price maintains the range of operation, operation rhythm, after the second quarter aluminum price is likely to usher in a weak market.
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