Development Status And Development Path Analysis Of Alumina Industry Of Shanxi Province (Part Ⅲ)

Development Status And Development Path Analysis Of Alumina Industry Of Shanxi Province (Part Ⅲ)

4. Discussion on development path of alumina industry of Shanxi Province

1) To integrate upstream industry resource and develop alumina industry intensively

China is a country with a high alumina industry concentration. Based on Aladdin Statistics, as of 2015, China has cultivated top 10 alumina capacity companies: CHINALCO, Xinfa Group, Weiqiao Group, SPIC, East Hope Group, Huayin Aluminum, Nanshan Group, Heung Kong Group and Yangquan Coal Industry. These top ten companies contribute to capacity of 59.1 million tons, accounting for 85.7% of total capacity. They contributed to capacity of 50.51 million tons, accounting for 87.5% of total capacity in China.

To exert resource superiority, integrate bauxite and alumina industry in the province and strengthen industrial concentration. Lv Liang is a region that integrates five major strengths of energy, resource, electric power, power grid and industry in Shanxi of China. It is also a region that is fully recognized as bearing good potential for aluminum industry development. We should actively exert strengths in natural bauxite resource and alumina industry, and conduct industry integration and capacity replacement for small-scale companies through merging and reorganization. We should also achieve optimal intensive production, reduce production cost through better resource integration, finally enhancing core competitiveness of companies.

2) To promote coal-electricity integration substantively and reduce electric power cost for companies

To fully exert coal resource strengths of Shanxi and form the competitive industry chain of “coal-electricity-X”. According to statistics, power generation coal used in Shanxi was 120 million tons, wherein power generation coal for generating province-wide electricity was 80 million tons. If the price of province-wide-electricity coal is more favorable to coal-fired power generation companies, these companies will enjoy more discount room, which will further reduce electricity cost. This is great news to aluminum companies (big electricity user) and the implementation of downstream companies. It will further lead to swift growth of electricity consumption in the whole province, increase utilizing hours of coal-fired unit and continuous reduction in generating cost of coal-fired unit, thus forming virtuous cycle in this industry.

Using “Pilot Programme of Local Area Power Grid Operation in Aluminum Recycling Industry Park in Shanxi Province” brought up by Jinneng Group as a pilot project, to advance the construction of local area power grid in key alumina areas in the province; taking advantage of electricity selling mechanism reform, to support provincial power companies including Jinneng Group, Datong Coal Mine Group, Shanxi International Energy Group and provincial key aluminum companies, aluminum industrial parks and social capital in collaboratively establishing electricity selling companies to develop incremental power distribution and direct power dealing, thus significantly reducing comprehensive electricity price for aluminum industry and enhancing core competitiveness.

3) To construct modern logistics industry and promote sustainable and sound development of alumina industry

As bulk commodity, aluminum industry pretty much relies on logistics for raw material purchasing and product selling. From a long-term perspective, the construction of modern logistics network, the connection between railway, highway and port will create much convenience for industrialized companies. These facilities significantly help to reduce transportation cost and improve company sustainability. With the volume reduction of high-quality domestic bauxite, volume of imported bauxite will get increased and alumina industry will be relocated to coastal areas where transportation cost is lower. Therefore, better logistics and lower transportation cost will greatly improve bulk commodity company competitiveness. We should integrate logistics resource including highway and railway in the province with Jinneng Group, Transportation Holdings Group and Shanxi Energy & Traffic Investment and other provincial state-owned companies as leading companies. By building modern logistics service industry, we aim to provide more convenient logistics system for alumina companies in the province and reduce alumina transportation cost.

4) To promote intelligent manufacturing and extend industrial chain of aluminum industry via various ways

Provincial state-owned companies, with the support of company technical reform capital from Department of Industry and Information Technology of Shanxi, can cooperate with social capital and financial institutes to promote backbone companies in aluminum industry in Shanxi to actively carry out transformation and upgrading of intelligent manufacturing through setting up fund of intelligent manufacturing renovation in aluminum industry.

We should draw lessons from supporting policies for aluminum industry development in other domestic provinces to solve problems in our province like weak midstream aluminum industry and weak downstream aluminum deep processing, and unreasonable structure and layout of alumina industry chain. We need to introduce deep processing industry for our aluminum industry via various ways, so as to extend industry chain and improve layout of aluminum industry chain; we aim to export aluminum deep processing products with higher added value and improve sustainable competitiveness of Shanxi alumina industry, thus gradually transform our strengths of energy resource into strengths of economic development. For instance, Guizhou province supports aluminum companies through favorable electricity price. Those power generation plants in direct dealing with aluminum companies only charge fuel cost; Guangxi province formed a combo of self-generation power plant and high-energy-consumption companies to reduce final electricity price; Baise of Guangxi constructed Local Area Power Grid as separate grid and uses self-generation set of 1 million KW as support, reaching a balance between power cost and generating set; Xinjiang mainly relies on cheap coal price and self-generation power plants to develop its aluminum industry; in Inner Mongolia, self-generation power plants have been in use for 8000 hours, meanwhile, Inner Mongolia formulated a series of policies to reduce electricity price for aluminum companies in a substantive way. In addition, Inner Mongolia makes efforts to further reduce electricity price by adopting both wind power and thermal power.

As aluminum is an industry well controlled by the country for its severe overcapacity, currently the only way to develop this industry is capacity replacement. According to “Notice on Aluminum Companies Implementing Capacity Replacement through Merging and Reorganization” (original MIIT [2018] No. 12) released by Ministry of Industry and Information Technology and “Implementing Regulations of Capacity Replacement of Aluminum in Steel, Cement and Plate Glass Industries in Shanxi” (original CE Investment [2018] No. 89) by Shanxi Commission of Economy and Information Technology，companies in Shanxi should actively make efforts to achieve capacity replacement index by merging and reorganization, by internal capacity shifting within companies that have the same actual group controller and by capacity index trading. Provincial state-owned companies should make active efforts to, through strategic investment and cross-shareholding, guide alumina projects initiated in our province or companies authorized with bauxite resource to transfer aluminum capacity to our province

5) To raise industrial comprehensive utilization level and achieve green sustainable development

The production of alumina requires abundant water resource. As a province lacking in water resource, Shanxi should lay great emphasis on waste water discharge reduction and water pollution control to continuously improve waste water utilization rate. Red mud is polluting waste generated when we extracting alumina. Every one ton of extracted alumina generates one to two tons of red mud. Red mud contains plenty of chemical alkali difficult to remove, and it also contains other impurities like fluorine and aluminum, so we are still at an early stage in harmless disposal of red mud. In China, red mud from alumina is mainly used for roadbed, manufacturing concrete and water permeable brick, at a very low utilization rate. With the growth of capacity and yield of alumina, the storage volume of red mud is getting increased, which leads to bigger occupied area and hidden hazards in environment and safety. Therefore, we should strengthen our efforts in developing harmless and resource utilization of red mud and developing new industrial comprehensive utilization to achieve green and sustainable development.