Work on a Green Aluminium Industrial Park being set up by the Yunnan provincial Government and Shandong Weiqiao Pioneering Group Co Ltd, a Fortune Global 500 company, commenced in Wenshan Autonomous prefecture of the province on Wednesday.

Being set up with an investment of 40 billion yuan ($5.72 billion), the project has already attracted nine enterprises across the aluminium industry value chain. When fully operational, its annual sales and industrial output are expected to reach 100 billion yuan and 30 billion yuan respectively and will create 12,000 jobs for local people.

The commencement of work at the park also marked the beginning of Shandong Hongqiao’s two-phase relocation of 30 percent of its smelting capacity, totalling 2.03 million metric tons annually, from Binzhou city, Shandong province, to the hydropower-rich prefecture bordering Vietnam, in pursuit of green capacity and more presence in the Belt & Road related markets. Shandong Hongqiao is a sister company of Weiqiao Pioneering.

The phase one capacity of 1 million tons will be in position in late 2020. Currently, the company mainly relies on coal-fired power for the electricity-intensive smelting process, and the capacity in Yunnan will use cleaner hydropower.

“The capacity to be relocated amounts to 5.4 percent of China’s total aluminium capacity, and we want to affirm that they are not new capacity, but what is being swapped from coal-power to hydropower,” said Yang Congsen, Deputy General Manager of Shandong Weiqiao Pioneering.

The company wants to demonstrate to the world Chinese manufacturer’s commitment and determination regarding green and sustainable development, he said.

“As China’s manufacturing and consumption industries upgrade, utilisation of aluminium is expanding to more sectors very fast, especially in new energy vehicles, smart home appliances, construction, and commercial aviation, while aluminium consumption per capita in China is only about one third of the global level,” he said.

“That creates huge growth opportunities for Chinese aluminium enterprises, but also prompts us to be increasingly aware of the importance of green and sustainable development, and to capitalise on green technology and clean energy, because more customers are buying environmental-friendly aluminium products.”

He said Yunnan province’s agreeable business environment and gateway position to South Asia, Western Asia, and Southeast Asia, attracted the company, apart from its rich clean energy resources.

Planning to spend 3 billion yuan on the two-phase capacity relocation, the company is also eyeing the related markets in the next 10 years, although currently there are few aluminium factories in the area due to small-scale aluminium demand, he said.

Yunnan province, with its rich hydropower electricity resources and green energy development policies, has become a top destination for Chinese aluminium companies to relocate their capacity in the past two years, according to a recent report from Guotai Junan Futures.

Such relocation was driven by the industry’s production restructuring and upgrading, and the quest for lower costs, the report said.

The province has nearly 2.6 million tons of operational aluminium capacity, with a projected capacity of 4 million tons to 6 million tons in the future, according to the report.

Several Chinese aluminium companies, including aluminium Corp of China, the largest aluminium company in the world, and Shenhuo Group, based in Yongcheng city, Henan province, have been drawn to the region.

Hu Jiachun, a nonferrous metals analyst with Tianfeng Future Research Institute, said China is the world’s largest aluminium producer, and must strictly rein in new capacity construction for the sake of environment protection.

Under such circumstances, Chinese aluminium companies are urged to expand up and down the industrial chain proactively to make up for weakness in deep processing capabilities, if they want to keep afloat in face of fierce competition amid the upgrading of the industry, she said.

The abundant hydropower resources in Yunnan & the local government’s coordinated development policies for hydropower & aluminium, which help speed up the establishment of a high-quality aluminium industrial chain, and reduce electricity costs, a major cost contributor in aluminium production, are the main factors attracting companies such as Weiqiao Pioneering, she said.

Besides, the industrial park’s special location, having ample transportation channels to the Pearl River Delta, the Chengdu-Chongqing area and economies in Southeast Asia, makes it easier to access related markets, Hu said.