How does Southwest capitalize on the benefits brought by the transfer of the electrolytic aluminum industry

In just a few years, approximately 13 million tons of electrolytic aluminum capacity have been gradually relocated from resource-rich regions such as Shandong, Henan, and Xinjiang to Yunnan and Sichuan. This seemingly simple geographical shift actually contains deep strategic adjustments within China’s industry. Among them, the economic, environmental, and strategic benefits gained by the southwestern region through this industrial transfer are reshaping China’s heavy industry landscape.

Cost Advantages and Carbon Emissions—Driving Double Benefits

Electrolytic aluminum is produced by electrolyzing aluminum oxide. On average, producing one ton of electrolytic aluminum consumes 13,500 kWh of electricity, equivalent to the electricity used by a household of five or six for five years. This means that electricity costs directly determine the industry’s competitiveness.

In the past, China’s aluminum industry relied on the advantages of coal power in the north. Giants like Weiqiao in Shandong and Shenhuo in Xinjiang used self-owned power plants to support the world’s largest aluminum capacity with cheap coal power. However, this business model faces fundamental challenges in the new era.

The most convincing data: in Shandong, the electricity cost per ton of aluminum is between 5,400 and 5,700 RMB; in Yunnan, relying on abundant hydropower from the Lancang and Jinsha Rivers, direct supply costs can be as low as 4,300 to 4,700 RMB. Saving nearly 2,000 RMB per ton, for large-scale electrolytic aluminum enterprises, this translates into annual profits reaching hundreds of millions.

More importantly, carbon emissions are a critical issue. The EU’s “Carbon Border Adjustment Mechanism” (CBAM) has been officially implemented, and China’s “dual carbon” goals clearly aim for carbon peaking by 2030 and carbon neutrality by 2060. This poses a survival challenge for traditional coal-powered aluminum production. Data shows that each ton of electrolytic aluminum produced with coal power emits up to 12.61 tons of CO₂, while hydropower aluminum in Yunnan emits only 1.57 tons—almost eight times less.

Northern coal-powered aluminum faces severe “carbon tariffs” in international markets, forcing companies to decide: either upgrade and transform or be eliminated by the market. Consequently, a large-scale industrial adjustment has begun.

Major Players’ Southwest Deployment—Concentrated Economic Benefits

China’s largest private aluminum company, Shandong Weiqiao, has made the most decisive choice. Once dominating globally with self-owned power plants, it is now relocating hundreds of thousands of tons of capacity to Wenshan, Yunnan. By the end of 2025, its Yunnan plant’s annual capacity will reach nearly 4 million tons, comparable to the entire North American market.

Industry giants like Xinjiang Shenhuo, Henan Shenhuo, and China Aluminum Corporation are also expanding new capacities in Yunnan. This concentrated transfer directly releases economic benefits for the southwestern region.

As a local aluminum enterprise, Yunnan Aluminum has long completed its strategic layout of integrated hydropower and aluminum production. Relying on abundant water resources, its costs and carbon emissions for electrolytic aluminum are among the lowest nationwide. By 2025, hydropower aluminum will account for over 87% of its capacity—far above industry average—making it the leading green electricity aluminum producer domestically.

This migration involving tens of millions of tons of capacity brings substantial economic benefits. Historically, despite rich water resources, Yunnan and Sichuan often faced “excess electricity” issues, with large amounts of water being wasted during flood seasons. The entry of electrolytic aluminum transforms “water wastage” into a “gold mine.” By 2025, the annual output value of green aluminum in Yunnan is close to 200 billion RMB, fostering development in Wenshan, Honghe, Qujing, and other areas. Supporting industries such as carbon anodes, electrolytic cells, logistics, and deep processing enterprises have also settled in, gradually forming a complete industrial chain in the southwest, generating lasting economic benefits.

Environmental Transformation and International Competitiveness—Long-term Green Benefits

The environmental benefits of this industrial shift are equally profound. China’s electrolytic aluminum carbon intensity has decreased by 38% over the past decade, largely thanks to the widespread adoption of hydropower aluminum. Overall, China’s aluminum industry’s carbon footprint has been significantly reduced, enhancing its international competitiveness.

By 2025, China’s aluminum exports are expected to reach 6.134 million tons, covering over 200 countries. Without this southward shift, these export figures could have already collapsed under the pressure of “carbon tariffs.” More strategically, China is actively promoting the development of “green electricity aluminum” certification standards internationally, seeking to gain influence in the global supply chain. This is not just about selling products but also about setting “standards” and “rules,” which contain enormous long-term benefits.

Industrial Vitality and National Strategy—Deep Red Benefits as a Protective Barrier

The deepest benefit lies in strategic security. Electrolytic aluminum is a strategic material directly related to aerospace, new energy vehicles, rail transit, and defense equipment. Moving capacity to Southeast Asia could risk supply chain disruptions in the event of geopolitical conflicts.

Through this internal migration, China not only preserves a complete industrial chain but also achieves technological upgrading and green transformation simultaneously. This is the core benefit of this industrial adjustment—protecting industrial lifelines and maintaining strategic initiative.

China is the only country in the world with a complete full-chain of bauxite ore, alumina, electrolytic aluminum, and high-end aluminum products. The United States, Europe, and Japan do not have this. This is China’s industrial competitive advantage, and Yunnan’s green transition is the most solid part of this defensive line. The southwest not only takes on capacity but also safeguards long-term benefits for industrial security and international competitiveness.