CompanyGraph
Yunnan Aluminium Co., Ltd.
000807 · SZSE · China
Smelts bauxite-derived alumina into aluminum ingots using Mekong hydroelectric power priced below China's coal-grid rate, structurally undercutting eastern Chinese smelters on electricity cost.
The Hall-Héroult process fixes electricity as the overwhelmingly dominant input cost, so the entire operation's cost position rests on the dedicated hydroelectric contracts with Yunnan provincial dam operators — contracts that are physically inseparable from the smelting capacity built against them. Those same contracts, however, cannot compensate for the river's seasonal flow minimums, because the electrolytic pots cannot be throttled or interrupted, capping utilization at whatever the Mekong's lowest-generation period allows. Substituting coal-grid power to bridge that gap would erase the cost differential over eastern Chinese smelters, meaning the constraint that sets the ceiling on output is the same mechanism that makes the operation viable. Growth is therefore bounded by the Mekong watershed's incremental dam capacity, and that ceiling is governed by water-management agreements between China, Vietnam, and Laos that sit entirely outside the company's control.
How does this company make money?
The company sells aluminum ingots and bars on a per-tonne basis, with pricing referenced against London Metal Exchange benchmarks — the globally used reference price for aluminum — plus regional premiums for delivery to western China and Southeast Asian markets. Sales are typically structured through annual supply contracts with automotive and construction customers.
What makes this company hard to replace?
The long-term power supply contracts with Yunnan hydroelectric facilities are not easily transferred, meaning a buyer or competitor cannot simply step into the same cost position. Established logistics networks through specific border crossings for bauxite imports represent a second layer of operational entrenchment. Aluminum quality certifications held with downstream manufacturers require lengthy requalification processes before an alternative supplier could be approved.
What limits this company?
Mekong River hydroelectric output falls seasonally with river flow, and the Hall-Héroult process cannot be interrupted or throttled without damaging the electrolytic pots — the large lined chambers where alumina is dissolved and converted into metal. This means smelter utilization is hard-capped by the river's minimum generation period, and supplementing with coal-grid power would erase the cost advantage the entire operation is built on.
What does this company depend on?
The operation depends on bauxite ore imports arriving through Guangxi and Yunnan border crossings from Vietnam and Laos, and on Mekong River hydroelectric generation from dams in Yunnan Province as its power source. It also requires caustic soda for the Bayer refining process — the chemical step that converts raw bauxite into alumina before smelting — and carbon anodes, which are consumed during electrolytic smelting. Rail transport connections linking the Yunnan facilities to eastern China manufacturing centers are necessary to move finished aluminum to buyers.
Who depends on this company?
Automotive manufacturers in Guangdong Province depend on this supply for aluminum body panels and would face supply chain delays if Yunnan production stopped. Construction companies across western China would lose access to competitively priced aluminum extrusions for building projects. Packaging companies serving Southeast Asian export markets depend on aluminum ingots processed near the regional border crossings.
How does this company scale?
Hydroelectric power contracts and smelting pot capacity can be expanded incrementally as additional dams come online in the Mekong watershed, allowing some growth without rebuilding the core structure. However, the company cannot scale beyond the geographic constraints of Yunnan's river system without losing its cost advantage over coal-powered smelters in eastern China — the watershed itself is the ceiling.
What external forces can significantly affect this company?
Water management agreements between China, Vietnam, and Laos govern seasonal hydroelectric generation schedules on the Mekong and sit outside any single company's control. Belt and Road Initiative trade policies shape the terms under which bauxite can be imported from Southeast Asian suppliers. Carbon emission regulations in China's aluminum sector create a policy environment that distinguishes between hydroelectric-powered and coal-powered smelting.
Where is this company structurally vulnerable?
Because the cost advantage depends entirely on those hydroelectric contracts delivering sufficient generation, any sustained reduction in Mekong river flow — from drought or from upstream dam management decisions by regional governments in Vietnam or Laos — pushes available power below minimum smelting requirements. This collapses utilization rates at precisely the moment coal-grid substitution would destroy the cost structure the contracts were built to protect.