Reuters reported that China's provincial governments are propping a quarter of domestic aluminium production through power subsidies despite soft global demand.

Mr Paul Adkins MD of the Beijing based aluminium consultancy said that "These subsidies play a huge part in turning loss-making operations into profitable centers. The number of plants under water shrinks to just a handful."

AZ China said that 5 Chinese provinces are now subsidizing power costs for aluminium smelters with more than 5 million tonnes of China's operating capacity receiving up to CNY 0.1 per KWH in assistance. Another 2 million tonnes of capacity receives seasonal power price cuts, as the wet season provides more water for hydro schemes, especially in China's southwest.

China is the world's biggest consumer of aluminium but is largely self sufficient. The industry is considered a strategically important regional employer. Last month, China's top aluminium producing province of Henan rolled out power subsidies to smelters in a bid to revive output, causing prices on the Shanghai Futures Exchange to fall over three percent to the lowest in 3 years. Henan province, accounts for about 20% of China's annual aluminium production capacity of more than 23 million tonnes.

Source - Reuters

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