A partnership announced yesterday by Yunnan Aluminium between Aluminum Corp of China (Chinalco) and Yunnan Metallurgical Group will see the emergence of a new Chinalco with greater access to the significant hydropower resources of Yunnan province.
Per an agreement signed in Kunming on Sunday, Yunnan Metallurgical Group, owner of Yunnan Aluminum Co Ltd., is to be merged with China Copper Co., a joint venture between Chinalco and the provincial government of Yunnan. Chalco, who is Chinalco’s listed unit, set the value of the agreement at over CNY100 million (US$15.6 billion).
The agreement will open Yunnan Aluminium’s 1.6 million metric tons per annum of aluminium smelting capacity to Chinalco. Yunnan Aluminium is currently constructing or planning to build an additional 1.45 million metric tons per annum of smelting capacity according to CRU’s Jackie Wang.
Experts see this as the latest in an increasing move by both state-run and private enterprises in the Middle Kingdom to extricate themselves from regulation-laden coal-fired energy in favor of cleaner hydropower.
Though the bump up in aluminium smelting capacity will see the company’s total capacity, which is currently an estimated 3.93 million metric tons per annum, begin to rise to the neighborhood of China Hongqiao’s total, which is listed at 6.46 million metric tons per annum as of last year, analysts warn that the company still has significant inactive reserves waiting in the wings.
“Yes, they will have as much as Hongqiao operating, though don’t forget Hongqiao has 2.6 million tonnes idle,” explained AZ China’s managing director Paul Adkins.
“Chalco has idle assets too, but none that could come back and be profitable.”
In addition to increased aluminium assets, the arrangement will see Chinalco benefit from the zinc and lead assets held by Yunnan Chihong Zinc & Germanium Co., which will be the firm’s first foray into both of those fields.