ALUMINUM Corp. of China Ltd., or Chalco, said Tuesday it would sell a 135,000 tons annual aluminum smelting capacity quota to Yunnan Aluminum, continuing the sector’s migration to China’s hydropower-rich southwest.

Yunnan Aluminum, which like Chalco is a subsidiary of State-owned Chinalco, the world’s biggest aluminum producer by capacity, came out on top in an auction for the quota, bidding 538.65 million yuan (US$80.64 million), excluding tax, Chalco said in an exchange filing.

The quota was available after Chalco shut down its Shandong Huayu smelting unit early last year due to high costs.

Aluminum capacity transfers between regions are permitted in China as long as they keep within overall quotas.

China, the world’s biggest producer and consumer of the metal, is seeking to cap overall smelting capacity at around 45 million tons per year to control emissions.

In its own filing, Yunnan Aluminum, which is based in southwestern China’s Yunnan Province, said that winning the quota would “help accelerate implementation of the company’s integrated hydropower and aluminum development strategy and further enhance competitiveness.”

It is the second time in two years Chalco has transferred a capacity quota to Yunnan Aluminum. In 2019, it sold a 170,000 tons quota after shuttering its Shanxi Huasheng subsidiary, making a 800 million yuan gain from the disposal.

Chinalco took over Yunnan Aluminum in 2018 as it sought to tap cleaner hydropower for the energy-intensive smelting process. Chalco itself also holds a 10 percent stake in Yunnan Aluminum and 38.9 percent in Yunnan Aluminum’s Yixin Aluminum unit. (SD-Agencies)