Domestic aluminum enterprises“stored electricity” in winter for the sake of self rescue

Although the majority of industry insiders held pessimistic views toward aluminum price in this year, electrolytic aluminum enterprises must try hard to seek survival in limited space.In order to overcome the power problem which accounts for over 40% of electrolytic aluminum cost, aluminum enterprises one after another adopted “power storage” self rescue strategy,on the one hand they increased electricity self supply ratio through acquisition, while one the other hand signed power usage contract to guarantee power supply.

Recently, Zhongfu Industrial Co., Ltd and Xinjiang Tianshan Aluminum Co., Ltd both published notice on “electricity storage”. Zhongfu Industrial Co., Ltd planned to spend 508 million yuan to acquire 41.05% equity of Zhongfu Electricity held by controlling shareholder Yulian Group, Tianshan Aluminum signed power usage contract guaranteeing no less than 3 billion kWh in annual power consumption with Tianfu Thermoelectric. All the above companies indicated that guaranteeing power supply and lowering electrolytic aluminum cost are key targets.On January 5, Zhongfu Industrial Co., Ltd published a notice, alleging that this time’s acquisition of Zhongfu Electricity’s equity would facilitate the company to reduce connected transactions, and further develop the company’s coalpower-aluminum integration operation model.At present, Zhongfu Electricity owns 3 300,000KW power generator units, with annual power generation capacity of 7 billion kWh,95% of which is supplied to the company, contributing the major source of power supply for the company’s main businesses.

Regarding this development, Bao Qing, analyst of Donghai Securities, said Zhongfu Electricity’s annual power generation volume is around 7 billion kWh, its cost of power generation is only 0.48 yuan/ kWh, but externally purchased power costs about 0.62 yuan/ kWh, at present the company’s self owned power generator units can meet the power needs of the company headquarters’ electrolytic aluminum production lines.

Furthermore, according to Lin Yang, analyst of Dongxing Securities, among public listed companies, Nanshan Aluminum is also a company with relatively high electricity self supply ratio,it owns 732,000 KW thermoelectric unit, with annual power generation capacity of about 4.4 billion kWh, in 2011 the company generated 3.5 billion kWh of electricity, the overall power generation cost is about 0.41 yuan, which is lower than big industry electricity price in Shandong of 0.67 yuan. In addition to supplying self-owned electrolytic aluminum (needing about 2.27 billion kWh), the company’s power is also supplied to Yili Power and other businesses of the Group.

In 2012 most domestic aluminum enterprises were deeply trapped in loss, against the background of continual downturn in the industry,the majority of aluminum enterprises had to devise ways in self cost control, developing self owned power factory to reduce cost has become a general trend. Based on 1.9 tonnes of aluminum oxide, 13,800 kWh electricity, 0.5 tonne of carbon, and 0.028 tonne of fluoride for producing one tonne of electrolytic aluminum,the direct production cost of electrolytic aluminum is between 14,000 yuan/tonne ~ 15,000 yuan/tonne, which is basically on the same level with the current aluminum price, if aluminum enterprises can have their own power plant, the cost will be effectively lowered.

A typical case is Shenhuo Coal & Power Co.,Ltd, in the first half of 2012 its electrolytic aluminum production was 230,000 tonnes, the unit price is 13600 yuan/tonne, down by 637 yuan/tonne on Y-o-Y basis, as a result, in the first half of the year its electrolytic aluminum business sustained a loss of 500 million yuan,the company’s biggest highlight is full capacity trial operation of Henan Shenhuo Power Co.,Ltd in December last year.

Shenhuo Coal & Power Co., Ltd published notice on December 13 last year, alleging that 1X600MW supercritical coal-fired power generation units with an investment of over 2 billion yuan of Shenhuo Power Generation, a wholly owned subsidiary of Shenhuo Coal &Power Co., Ltd, had successfully passed 168 hour full capacity trial operation on December 12, thus kicking off its commercial operation stage. According to Tang Zongchen, analyst of Huatai Securities, after Shenhuo Henan Power Plant is launched into production, the estimated cost is 0.437 yuan/kWh, which can save crude aluminum production cost by 306 million yuan for the company compared with the current grid power price 0.601 yuan/kWh.