Now, however, about 2 million tonnes of capacity, or 20% of the provincial total, is offline, Li Jiahui, an analyst at consultancy Shanghai Metals Market, told a conference in Zhengzhou. Average rainfall in Yunnan during the first quarter of 2023 was 60% lower than the same period in typical years, the provincial government's emergency management department said. Although the rainy season, which should start in late May, is likely to boost power supply, aluminium producers will only resume production if power is guaranteed for at least three months, smelter managers and analysts said. It costs up to 1 million yuan ($145,315)to restart an electrolyser, and about three months of production in Yunnan to cover those costs, the analyst Li said. "There's a likelihood that Yunnan producers will have to cut power usage again in May because of insufficient power supply," she added. Even if producers resumed all of their production by the third quarter, output this year will still be lower than last year's, Li said. For firms heavily invested in Yunnan, the unstable power raises costs. "Insufficient hydropower supply brings great challenges to companies' development and production," Yao Xizhi, chief analyst at Chinalco International Trading, a unit of Chinese aluminium giant Chinalco, told the same conference. The company is working on technology to manage the electricity load on electrolysers, he added. New capacity in other regions will more than make up for outages in Yunnan and slow demand growth will also help to shrink this year's deficit to 0.4 million tonnes, down from 0.7 million tonnes in 2022, Inga Simonenko, market intelligence director at Russian aluminium giant Rusal said at the conference. A slowdown in electric vehicle sales in China has lowered aluminium consumption in the country, compounding slow business from the property market. "Our orders this year are even worse than that during COVID lockdowns," Li Shijiao, the chairman at Jiangsu JEKE Aluminium, an aluminium processor, told Reuters.
Orders from EV makers, normally consuming half the firm's output, are down 30% so far this year, he added. ($1 = 6.8816 Chinese yuan renminbi) (Reporting by Siyi Liu and Dominique Patton; editing by Barbara Lewis)
