The Great Migration of Aluminum Electrolysis: What Did Southwest Actually Take Over

As the westward shift of production capacity becomes an unstoppable trend, the Southwest region has rewritten China’s heavy industry map with a “green miracle.” Over a few years, approximately 13 million tons of electrolytic aluminum capacity have moved from traditional coal-powered bases in Shandong, Henan, Xinjiang, and other regions to the water-rich inland areas of Yunnan and Sichuan. This industrial transfer, involving hundreds of billions of yuan in investment, is essentially China’s strategic choice to reshape its industrial system.

Traditional Model Faces “Triple Pressures”

In the past, China’s electrolytic aluminum industry relied heavily on a development model of “one black, one capital”—cheap coal power and self-owned power plants supporting capacity. Giants like Weiqiao in Shandong and Shenhuo in Xinjiang benefited from this model. But this logic has now reached its end, facing three major pressures.

First is economic pressure. Producing one ton of electrolytic aluminum requires 13,500 kWh of electricity, with power costs accounting for over 40% of total production costs. In traditional bases like Shandong, electricity costs per ton of aluminum reach 5,400–5,700 yuan. After relocating to Yunnan, leveraging abundant hydropower resources, costs can drop to 4,300–4,700 yuan per ton. Behind this simple arithmetic is a nearly 2,000 yuan cost difference per ton, which translates into tens of billions of yuan in profit margin differences for companies producing millions of tons annually.

Second is environmental pressure. The carbon emissions intensity per ton of electrolytic aluminum has become a critical factor for continued operation. Coal-powered aluminum production emits up to 12.61 tons of CO₂ per ton, while water-powered aluminum emits only 1.57 tons—almost an eightfold difference. This gap becomes deadly amid the global wave of carbon tariffs— the EU’s Carbon Border Adjustment Mechanism has been officially implemented. China’s “dual carbon” goals aim for peak carbon by 2030 and carbon neutrality by 2060. Northern coal-based aluminum faces an almost “market elimination” verdict.

Third is strategic pressure. As a strategic material, electrolytic aluminum is vital for core industries such as aerospace, new energy vehicles, and rail transit. Continuing to rely on coal power not only hampers international “green certification” but also risks falling behind in global supply chain competition.

Leading Companies Race to “Move South”

Pressure has translated into action. By the end of 2025, nearly all major players in China’s aluminum industry have participated in this industrial shift.

The most decisive move came from Weiqiao in Shandong. Once dominating globally with self-owned power plants, this private aluminum giant made a strategic adjustment—relocating millions of tons of capacity to Wenshan, Yunnan. By 2025, its Yunnan plant’s annual capacity had reached nearly 4 million tons, comparable to the entire North American market. This is not just a capacity transfer but a fundamental change in production mode.

Other giants like Shenhuo in Xinjiang and Shenhuo in Henan are also actively establishing new capacities in Yunnan. State-owned China Aluminum Corporation (Chinalco) is also accelerating its Yunnan projects.

The most competitive is Yunnan-based Yunnan Aluminum. Having long recognized the industry’s direction, it has adopted an integrated strategy, deeply consolidating hydropower resources from the Lancang and Jinsha Rivers to establish a “double minimum” advantage in electrolytic aluminum costs and carbon emissions. By 2025, over 87% of its water-powered aluminum capacity will be in operation, far above industry averages, making it the undisputed leader in green electricity aluminum domestically.

“Triple Benefits” for Southwest

This large-scale migration has brought multiple benefits to the Southwest region.

Economic benefits are the most direct. Yunnan and Sichuan once faced the dilemma of “excess electricity that cannot be used”—during flood seasons, large amounts of water are wasted, and hydropower resources remain idle. The arrival of the electrolytic aluminum industry has turned this “wasted electricity” into a goldmine. By 2025, Yunnan’s green aluminum industry is expected to generate nearly 200 billion yuan in output value, with Wenshan, Honghe, Qujing, and other areas thriving because of aluminum. It’s not just electrolytic aluminum itself; related industries such as carbon anodes, cathodes, logistics, and deep processing have also settled in, forming a complete industrial ecosystem in the Southwest.

Environmental benefits are being realized. Over the past decade, China’s electrolytic aluminum industry has reduced its carbon emission intensity by 38%, with the widespread adoption of water-powered aluminum in Yunnan playing a key role. By 2025, China’s aluminum exports will reach 6.134 million tons, covering over 200 countries. Without this southward shift, these exports might have collapsed under the global “carbon tariff” wave. More profoundly, China is actively promoting international certification standards for “green electricity aluminum,” aiming to gain influence in the global green industry competition. This is not just about selling products but also about exporting standards and rules.

Strategic advantages are deeply hidden. Electrolytic aluminum is a key material for national defense, aerospace, new energy vehicles, and other strategic industries. Moving capacity to Southeast Asia or other countries could expose China to geopolitical risks, causing supply chain disruptions. Through this internal migration, China has safeguarded its aluminum industry’s lifeline while achieving comprehensive technological upgrades. More importantly, China is the only country in the world with a complete “bauxite → alumina → electrolytic aluminum → high-end aluminum” industrial chain. The US, Europe, and Japan cannot match this. This full industry chain is China’s most formidable “moat” in its industrial system.

The green miracle in the Southwest is a crucial part of this “moat.”