China rations electricity, aluminum prices soar

After iron ore and steel, it is now aluminum’s turn to be affected by Beijing’s environmental ambitions. To meet its commitments to reduce carbon emissions, the central government has set energy consumption targets for the various provinces of the country. As 19 of them have already exceeded them for the first half of the year, the government has called on the provinces to redouble their efforts to contain the demand for electricity from economic players.

“This is a clear message that China is determined to reduce its energy consumption,” said Jia Zheng, commodities trader at Shanghai Dongwu Jiuying Investment Management quoted by Bloomberg. The electricity supply of aluminum producers will be increasingly constrained, warns the market operator. This call is thinly aimed at the sector, as the production of this metal requires an extremely power-intensive process. According to calculations by S&P Global Platts, aluminum alone is responsible for 6.7% of total Chinese consumption in 2020.

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