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China is accelerating its efforts to clean up heavy industry, allocating money for the first time last year to help hard-to-decarbonize sectors increase the use of fuels such as green hydrogen. The push comes as the country continues building more solar panels, wind turbines, and nuclear reactors and expanding its grid faster than anywhere else in the world.
Those two trends are converging to spur the greening of aluminum in particular — a commodity that requires so much power to manufacture that it’s nicknamed “congealed electricity.”
Aluminum production hit a record high last year in China as demand for the alloy, which is used in virtually every kind of electrical application, soared in tandem with the country’s data center boom, according to numbers the National Bureau of Statistics released in January. Prices of the globally traded commodity have spiked by nearly 35% in the past year, meaning that aluminum produced with clean electricity, which comes with a green premium, is more competitive.
At the same time, Beijing’s latest policies to steer its world-leading aluminum smelters away from coal are just taking effect. While the most recent national statistics showed steel production at a seven-year low — a result of the shift away from housing construction — analysts say the surging demand for aluminum could speed up the pace of that industry’s transformation.
“I do expect green aluminum production to pick up, even as other commodities retrench,” said Xinyi Shen, the head of the China team at the Centre for Research on Energy and Clean Air, a Finnish nonprofit that tracks Chinese heavy industry. “In China, aluminum decarbonization is progressing … showing stronger policy momentum than steel at the moment.”
There are limits to how quickly the shift can take place. China has for the past decade maintained a cap on aluminum production to prevent smelters from oversupplying and destabilizing the power grid. New production to meet surging demand is quickly approaching that limit, according to a December analysis from the bank ING. But already, the industry is starting to reorient production toward decarbonization.
One way China’s aluminum industry is going green is through recycling. Producing secondary aluminum requires only about 5% of the energy needed to produce primary aluminum, meaning that carbon emissions are typically up to at least 80% lower. Between 2015 and 2024, China’s recycled aluminum output grew by about 6.25% per year, reaching nearly 11 million metric tons in 2024. In March 2025, Beijing set a target of more than 15 million tons of recycled aluminum by 2027.
“This pathway is already cost-competitive and relatively insulated from power-price volatility, so it’s likely to keep expanding even in a softer macro environment,” Shen said.
The other way is by transitioning existing smelters to using clean power. Since nearly 70% of primary aluminum production relies on coal-fired or natural-gas-fired power plants, the sector produces about 2% of global greenhouse gas emissions. The rest is largely powered from hydroelectric dams, next to which older smelters were traditionally sited.
The power-intensive smelting process involves blasting a molten bath of cryolite with an electrical current that separates out dissolved aluminum and yields a molten metal that can be cast into ingots, billets, or bars. In China, where most of the world’s aluminum is produced, the vast majority of that electricity has historically come from coal. Under its new regulations, Beijing wants most of the power that smelters consume to come from renewables.
Last year, aluminum became the first energy-intensive industrial sector subject to a new renewable power mandate requiring green electricity to supply 70% of smelters’ electrons, up from just over 25%.
“Compliance is expected to be met increasingly through green power contracts and renewable-energy certificates, partly in response to both China’s domestic climate goals and emerging international green trade standards,” Shen said.
China has begun shifting its smelting capacity to provinces with excess hydropower or room for wind and solar arrays to offset coal- and gas-fired production.
Even before Beijing mandated that aluminum producers use more renewable power, smelters were already “looking at moving to hydro-rich regions” such as Yunnan province, David Fishman, a Shanghai-based analyst who tracks the Chinese electrical industry at the Lantau Group consultancy, wrote in a thread on X last month.
Wind and solar trailed behind hydropower, nuclear, and coal in the list of the lowest retail power prices in China, Fishman wrote. But he said that buying renewable energy credits was just as valid a solution if those certificates come from vetted, reputable sources in places with expanding production, such as Inner Mongolia or Xinjiang. Still, he noted, relocating to renewables-rich regions “isn’t just about cheap power.”
“It’s also about reducing uncertainty around long-term compliance with rising clean power quotas, which is becoming a C-suite level strategic variable,” Fishman wrote. “This is as true [if] you’re moving the smelter to Yunnan (for all its hydropower) or Xinjiang (where you’re going to have to pursue a wind/solar solution).”
A big open question is whether Chinese companies will start operating new smelters in other countries, and whether those facilities will be powered with renewable electricity, said Seaver Wang, the director of the climate and energy team at the Breakthrough Institute, a research nonprofit in California.
“The next big story in global aluminum is whether Chinese firms start developing overseas, particularly in Indonesia and Vietnam,” Wang said, noting that Indonesian advocates he’d spoken to feared that the facilities would use coal. “With aluminum capacity in China capped, where is the industry spilling over into?”
Rising demand globally for lower-carbon products is spurring on Chinese industry. That’s particularly true now that the European Union’s carbon tariff — the first in the world — took effect in January. Brussels is considering establishing a way to selectively exempt industries from the levies. But the bloc has so far vowed to keep requiring importers to buy carbon certificates to offset the emissions produced during manufacturing.
The China Nonferrous Metals Industry Association rolled out updated rules last year for the certification and trading of “green electricity aluminum,” in a move Shen said was “intended to ensure that low-carbon aluminum carries recognized commercial value in the market, rather than being merely a reporting label.”
Last summer, a Chinese steelmaker scheduled its debut shipment of green steel to a buyer in Italy, carving out the start of a supply chain that would comply with the EU’s carbon tariff. In November, top steel trade associations in Europe and China agreed to work together to create uniform standards for what qualifies as green.
If China’s experience with solar panels and batteries — in which its efforts to meet domestic demand led to a flood of cheap exports — is any indicator, the global market could soon have an influx of green aluminum.
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