Leadership transition may bring investment boom, western Chinese electrolytic aluminium factories should have mutual benefit with local governments

With the happening of local NPC&NPPCC, provinces in western China expanded investments by launching trillions of yuan investment plans, which brings new opportunities to this area. However, specialists said that although the latest five-year-plan required to get rid of outdated electrolytic aluminium capacities, as a vast territory with a sparse population, western China still has a large number of new electrolytic aluminium factories. These settlements of new factories are taking getting land and resource, which will save potential for future development.

The reasons of eastern aluminium factories moving to west area, according to Yanxia Fan-an analyst, are low human cost and electricity cost in western China. The average electricity price in China is 0.5 yuan per kwh and the electricity cost of electrolytic aluminium is 14 thousand kwh per ton. We can see that electricity cost take more than 40%. But in areas like Xinjiang, Shanxi, the electricity cost of self-contained power plant in some aluminium companies is less of 0.1 yuan per kwh. This single project can save more than 30% of the cost.

Besides electricity, cheap coal resource is also an important reason. A manager from a large electrolytic aluminium said that there investing to Xinjiang has both advantages and disadvantages. The coal resource is rich and price is low. But it’s far from mainland market, which will increase transport cost.

Analyst Yanxia Fan pointed that policy change also lead to aluminium factories move. The twelfth Five-year Plan required to get rid of outdated capacities. A file aimed at stopping the electrolytic aluminium factories was released by 8 departments including National Development and Reform Commission and MIIT. These documents have serious impacts on electrolytic aluminium projects in eastern provinces.

About the huge investments in western areas, specialists think that the hope of global economy is in the east, while the hope of Chinese economy is in the west. When eastern China is having problems developing economy, western China is developing in a high speed.

The basic of cooperation between east and west is mutual benefit. Eastern companies should have consciousness of developing the west area, not taking advantage of it.