Observations on the Transformation of the World's Largest Aluminum Smelter Base

 Weiqiao Lightweight Base Lightweight Whole Vehicle Body Assembly Project Welding Workshop

(Photographed on June 15) Courtesy of Zouping Municipal Committee Propaganda Department

Taking electrolytic aluminum as an example, the production of 10,000 tons of electrolytic aluminum can achieve an industrial chain output value of 327 million yuan. Shutting down 1.5 million tons means a reduction in output value of 49.05 billion yuan.

“For the same ton of aluminum water, the added value of processing into mobile phone profiles exceeds 20,000 yuan, which is 20-30% higher than in the past, and the payment term is short. Compared with the company's original business, the processing is simpler.”

Ordinary alumina is only two to three thousand yuan per ton, while the price of deep-processed products can be as high as 1.2 million yuan per ton. Zouping regards aluminum deep processing and lightweight application as a breakthrough to enhance added value and break through the mid-to-high end.

As the world's largest electrolytic aluminum production base and the country's largest cotton textile base, Zouping City, Shandong Province, has just experienced the pain of transforming its development mode and adjusting its industrial structure.

Zouping's aluminum industry started in 2001. With the rapid development of industries such as electrolytic aluminum, Zouping has become a strong industrial city in Shandong, a major economic province, and also a city with a heavy industry. The output value of the four industries of aluminum, steel, coking, and thermal power once accounted for more than 80% of Zouping's total economic output.

However, the development model with a heavy industrial structure and high energy consumption and emissions also put Zouping's pollutant emissions at the forefront of the province, and even touched the "ceiling" of environmental capacity and development space. In 2017, several ministries and commissions jointly cleaned up illegal electrolytic aluminum production capacity, and the extensive development mode relying on high energy consumption was no longer feasible.

Zouping started a drastic weight-reduction campaign, and its GDP experienced its first decline since the founding of the People's Republic of China. Pi Tai Tian, Secretary of the Zouping Municipal Party Committee, said: "De-capacity will certainly bring a period of pain, but we must take a new path of active transformation."

After continuously reducing the production capacity of its pillar industries for many years, from January to May this year, Zouping's fiscal revenue increased by 21.1% year-on-year. In the past two years, Zouping's average fiscal revenue growth rate has been 7.6%, and the average tax revenue growth rate has been 10.7%, gradually embarking on a path of balancing carbon reduction, pollution reduction, and economic development. In the process of structural adjustment and value chain reshaping, the largest electrolytic aluminum production base has set its sights on the transformation goal of a world-class high-end aluminum industry base.

1. "Failure to transform will lead to lagging behind"

In 2017, multiple ministries and commissions jointly cleaned up illegal electrolytic aluminum production capacity, and steel de-capacity was launched simultaneously. Zouping, whose coal consumption accounted for one-eighth of the entire Shandong Province, became a key area for Shandong to rectify high energy consumption.

Pi Tai Tian said: "Zouping has entered the window period for the transformation of old and new growth drivers. If it does not transform its driving force for development, Zouping will fall behind in economic development. It must follow the central and Shandong policies and first eliminate and resolve excess production capacity."

Shutting down and dismantling backward coal-fired units, reducing coal consumption, and shutting down electrolytic aluminum production capacity... In 2017 alone, Zouping completed 1.83 million tons of steel de-capacity tasks and shut down 1.5 million tons of electrolytic aluminum production capacity.

According to a rough estimate, "reducing steel and coking" directly affected Zouping's industrial output value by 45 billion yuan and local tax revenue by 1 billion yuan. Taking electrolytic aluminum as an example, the production of 10,000 tons of electrolytic aluminum can achieve an industrial chain output value of 327 million yuan. Shutting down 1.5 million tons means a reduction in output value of 49.05 billion yuan.

After a series of reductions in growth drivers, Zouping's heavy industry began to lose weight. In 2018, the total output value of Zouping's large-scale industrial enterprises decreased by 11% year-on-year nominally, the industrial added value decreased by 9.96% cumulatively, and GDP decreased by 4.9% year-on-year. This was the first time that Zouping's GDP had declined since the founding of the People's Republic of China.

By December 2020, Zouping had cumulatively shut down and transferred 2.145 million tons of electrolytic aluminum production capacity and 3.1 million tons of coking production capacity. The coal consumption of large-scale industrial enterprises decreased by 14.77% year-on-year, and energy consumption decreased by 7.78% year-on-year. The regional energy consumption structure and environmental emission levels have been significantly improved.

Hu Yunjiang, mayor of Zouping City, introduced that the ecological effect of the transformation is obvious. From January to August 2019, Zouping had 205 days of "blue sky and white clouds," an increase of 24 days year-on-year.

2. Enhancing Added Value and Moving towards the Mid-to-High End

As a top 100 county in the country, how to quickly transform its development mode, adjust its industrial structure, and find a new growth curve while reducing the production capacity of its pillar industries and experiencing a decline in GDP growth has become a focus of attention.

With a loud bang, the cooling tower of the thermal power unit of Shandong Weiqiao Group began to be demolished, freeing up 680 acres of land. Everyone was discussing what kind of "beautiful birds" could be introduced. Shortly after, the Weiqiao Lightweight Base was built on the original site of the unit, and 10 months later, the project with an annual output of 17 million aluminum products officially went into production.

After the transfer of production capacity, Weiqiao Group actively planned the adjustment of its industrial layout. In 2017, it cooperated with universities to introduce high-end talents and technologies and opened up new areas in the research and application of lightweight automotive aluminum materials.

Ordinary alumina is only two to three thousand yuan per ton, while deep-processed products can be priced at 200,000 to 1.2 million yuan per ton. Pi Tai Tian introduced that Zouping regards aluminum deep processing and lightweight application as a breakthrough to enhance added value and break through the mid-to-high end.

Walking into the Weiqiao aluminum deep processing industrial park, aluminum foil, ingots, pull tabs for cans, high-end car hubs, glass curtain walls... Almost all aluminum products related to our lives can be found here.

“For the same ton of aluminum water, the added value of processing into Mobile phone profiles exceeds 20,000 yuan, which is 20-30% higher than in the past, and the payment term is short. Compared with the company's original business, the processing is simpler.” Fang Tao, deputy general manager of Shandong Yuhang Special Alloy Equipment Co., Ltd., said that it only took a year and a half for the company's new businesses such as lightweight automotive profiles and Mobile phone profiles to account for more than 50% of the company's sales, which was less than 10% before.

Currently, the proportion of mid-to-high-end aluminum products in Zouping's aluminum deep processing industry has reached 65%.

While "sending away" the "old birds," Zouping is racing against time to invite "new birds" to settle in. Walking into the Weiqiao Textile intelligent workshop, feeding, production, transportation... the entire process is automatically operated by robots, and customers can see the entire production process and progress without leaving home. Intelligent production has greatly increased production efficiency while reducing the number of workers.

In 2020, Weiqiao Group achieved annual sales revenue of 297.5 billion yuan, an increase of 6.22% year-on-year; and profits and taxes of 22.689 billion yuan, an increase of 46.45% year-on-year.

3. "Following the policy trend is the only way to develop"

On January 13 this year, China's first "corporate carbon label" project was launched at Shandong Innovation Group in Zouping. The Innovation Group indicates the amount of greenhouse gas emissions during production on product labels, actively guiding low-carbon consumption.

By closely following national policy trends, enterprises can achieve healthy and significant development. Interviewed Zouping officials and entrepreneurs believe that in the future, new energy will develop inclusively alongside traditional energy. We must reduce coal use, increase green energy, and improve energy efficiency; enterprises with a high proportion of clean energy will have a greater advantage in development.

“China's express delivery industry is developing rapidly. A carriage that is both strong, durable, and high-performing, yet lightweight, will certainly be popular.” Han Wenlai, technical director of Shandong Samsung Machinery Manufacturing Co., Ltd., introduced that compared to iron, aluminum alloy carriages are two-thirds lighter for the same volume, making them particularly suitable for long-distance logistics transportation by large trucks. According to customer testing, with an annual mileage of 300,000 kilometers, the comprehensive fuel consumption per 100 kilometers can be reduced by about 5 liters.

In order to cultivate new growth points in the "post-steel era," Zouping is promoting the upgrading of its steel industry, integrating the food industry into national strategies, and fostering innovative development in the aluminum industry. Simultaneously, new industries in pharmaceuticals and hydrogen energy are being developed to accumulate development momentum.

Xi Wang Group has introduced 10 core technologies from the Institute of Metal Research, Chinese Academy of Sciences, to build a project with an annual output of 1 million tons of high-quality rare earth steel, and has expanded its corn oil production capacity to 600,000 tons annually. After commissioning, Zouping's corn oil output will account for about two-thirds of the national total; Guangfu Group, a steel enterprise, is using the idle land left after relocation to develop projects such as supercomputing, intelligent computing, and data storage; Tiexiong Group is implementing a coke oven gas-to-hydrogen project and attracting supporting projects such as hydrogen fuel cells and hydrogen vehicles.

To accelerate technological innovation and business model innovation, on March 19, 2018, the bulk commodity trading platform (Alumin Valley Network) was officially launched, becoming Shandong Province's only aluminum spot trading platform. This platform provides services such as spot trading, supply chain finance, logistics and warehousing, and market information. It has currently attracted 208 member companies and achieved a transaction volume of 19.405 billion yuan in its first year.

In the Zouping Economic and Technological Development Zone Pharmaceutical Industrial Park, workers are busy with intense construction. A comprehensive pharmaceutical park integrating the research and development, production, storage, and business of raw materials and preparations is taking shape.

Hu Yunjiang said that previously, Zouping lacked such low-consumption and high-efficiency industries. Now, Zouping's industrial sectors are showing a high-quality development trend of "slimming and increasing efficiency."