Heavy Industry Migration Driven by Green Energy: How Southwest Became the New Hub for Electrolysis Industry

Over the past decade, China has been playing a grand game—relocating the most energy-intensive heavy industry from the northern coal-rich regions to the southwest hydropower areas. In just a few years, approximately 13 million tons of electrolytic aluminum capacity have collectively moved from Shandong, Henan, Xinjiang, and other places to Yunnan and Sichuan. Behind this industrial shift of tens of millions of tons lie considerations of cost, environmental protection, and strategy.

The Necessity of Transition from Coal Power to Green Energy

Electrolytic aluminum production is a typical high-energy-consuming industry. Producing one ton of electrolytic aluminum requires about 13,500 kWh of electricity—equivalent to the electricity used by a family of five or six over five years. Traditionally, China’s aluminum industry relied on giants like Weiqiao in Shandong and Shenhuo in Xinjiang to build their own power plants, dominating the global market with cheap coal power.

But this model has reached a turning point. The core reasons are the dual pressures of the green energy revolution and carbon constraints. The EU’s Carbon Border Adjustment Mechanism (CBAM) has been officially implemented, and China has clearly set its “dual carbon” goals—peak carbon by 2030 and carbon neutrality by 2060. This means high-carbon products face the threat of market exclusion.

Data best illustrates the issue: aluminum smelted with coal power emits 12.61 tons of CO2 per ton, while that produced with hydropower in Yunnan emits only 1.57 tons—nearly eight times less. Under the dual constraints of EU carbon tariffs and domestic carbon policies, traditional coal-powered aluminum production has no room to survive.

Cost and Environmental Advantages

Southwest hydropower is not only greener but also significantly cheaper. In Shandong, the cost of electricity for producing a ton of aluminum is between 5,400 and 5,700 RMB. In Yunnan, with direct hydropower supply, the cost can drop to as low as 4,300 to 4,700 RMB per ton. This means nearly 2,000 RMB in savings per ton of aluminum.

For companies with annual capacities of hundreds of thousands of tons, this translates into hundreds of millions of yuan in profit margins. More importantly, this cost advantage is not a short-term arbitrage but a fundamental structural difference—Southwest China has abundant hydropower resources with long-term stable supply. In the past, the region’s excess electricity was wasted due to overcapacity; now, the arrival of electrolytic aluminum industry turns “wasted electricity” into a “gold mine.”

Strategic Restructuring of Industry Leaders

This “green exodus” has attracted all major Chinese aluminum companies. Weiqiao in Shandong, China’s largest private aluminum enterprise, has made a decisive strategic shift—moving hundreds of thousands of tons of capacity to Wenshan, Yunnan. By 2025, its Yunnan plant’s annual capacity will reach nearly 4 million tons, comparable to the entire North American market.

Xinjiang Shenhuo, Henan Shenhuo, and China Aluminum Corporation are also expanding new capacities in Yunnan. Meanwhile, domestic firm Yunnan Aluminum has already completed an integrated hydropower-aluminum layout, leveraging the water resources of Lancang and Jinsha rivers. Its electrolytic aluminum costs are the lowest nationwide, with the lowest carbon emissions as well. By 2025, Yunnan Aluminum’s hydropower aluminum capacity will account for over 87%, far above the industry average, making it the absolute leader in green electricity smelting domestically.

Building a Complete Industry Chain in Southwest China

This internal transfer, costing billions of yuan and involving tens of millions of tons of capacity, has brought real economic benefits to Southwest China. By 2025, Yunnan’s green aluminum industry output value is expected to approach 200 billion RMB. Not only is capacity concentrated, but the entire industry chain is also shifting—companies involved in carbon anodes, cathodes, logistics, and deep processing are setting up in Wenshan, Honghe, Qujing, and other regions.

Southwest China has now formed a complete industrial chain ecosystem. What does this mean? It signifies a shift from merely being a raw material producer to becoming a true industrial hub. China’s electrolytic aluminum exports reach 6.134 million tons, covering over 200 countries. Without this green energy transformation, these export figures would have collapsed under carbon tariffs.

More importantly, China is promoting international certification standards for “green electricity aluminum,” striving for global influence. This is not just about selling products but also about setting rules—whoever controls the standards for green energy smelting will dominate future markets.

Deep Strategic Considerations at the National Level

The deepest significance of this capacity relocation lies in strategic defense. Electrolytic aluminum is a strategic resource vital to aerospace, new energy vehicles, rail transit, and national defense equipment. If capacity is moved to Southeast Asia, geopolitical conflicts could cause supply chain disruptions at any moment.

Through this internal migration, China not only preserves a complete industrial chain but also achieves technological upgrading. It is a unique strategic advantage—China is the only country in the world with a full industry chain from bauxite, alumina, electrolytic aluminum, to high-end aluminum products. The US, Europe, and Japan cannot do this.

The core competitiveness of Chinese industry lies in this complete industrial chain. The green energy transition in Yunnan is a crucial part of this chain—achieving cost leadership, environmental upgrades, and strategic independence simultaneously. The relocation of 13 million tons of capacity is not just a geographic shift but a systemic evolution of China’s heavy industry.