China’s Hydropower Surge Drives Record Aluminum Production
China's aluminum production reached an unprecedented high last month, driven by the resurgence of hydropower resources in Yunnan province. After enduring years of drought that crippled electricity supply, the recent heavy rains have revitalized hydropower reserves, enabling smelters to reactivate previously idled capacity. This boost in hydropower has been instrumental in resuming operations, with an additional 330,000 tons of aluminum capacity expected to come online in Yunnan this month, according to Bloomberg Intelligence. Despite this increase in production capacity, market analysts anticipate a potential decline in aluminum prices in June, following a spike to a two-year high in May, due to softened demand in response to higher prices.
The statistics bureau reported a 7.2% year-on-year surge in aluminum output, totaling 3.65 million tons. However, the daily production rate saw a slight decrease compared to the shorter month of April. This trend is not isolated to aluminum; steel production also saw a rise of 2.7%, reaching 92.86 million tons, despite recent declines. The steel industry's resilience can be attributed to the manufacturing and export sectors compensating for the significant downturn in real estate demand. Nonetheless, steel mills continue to operate with slim margins, and the Chinese government has reiterated its commitment to curbing production to meet climate targets.
In the energy sector, the impact of weak consumption was notably visible. Oil refining activities fell by 1.8% as refineries undertook seasonal maintenance amidst sluggish demand. Conversely, both natural gas and crude oil production saw an increase as China aimed to lessen its dependency on imports. Despite these gains, coal production declined, now running 3% below the pace set last year during a record-breaking period.
Renewable energy sources, particularly hydropower and solar, have significantly contributed to the reduction in thermal power generation. For the first time since September, thermal power output fell on an annual basis, reflecting the growing influence of renewables in China's energy mix. This decrease in fossil fuel consumption is a positive indicator that China’s carbon emissions may have reached their peak, supported by the record levels of renewable installations last year. As China continues to pivot towards sustainable energy solutions, the effects are beginning to manifest in reduced carbon footprints and a more balanced energy landscape.
