“Why do we bother?” Australia can’t compete with China’s green transition, but it can leverage its success

The scale, proximity of customers and even the carbon reduction efforts of China’s huge aluminium smelters will make it very difficult for older, smaller, less-integrated facilities like Tomago in NSW to compete, veteran energy analyst Tim Buckley says.

Buckley, the head of Climate Energy Finance who returned recently to Australia from his latest trip to China, said the “staggering” scale of manufacturing and the speed of construction there put Australia’s $2.5 billion efforts to bail out facilities such as Tomago in the shade.

The visit took in the Hongtai Aluminium smelter in the southern province of Yunnan. Construction on the site began in December 2019, with the first metal produced within a year.

Annual output is now 2.03 million tonnes, the most for any single site in the world, or triple Tomago’s yearly production of about 590,000 tonnes.

Buckley said he travelled with an Australian advisor to the Yunnan smelter’s owner, China Hongqiao Group. “I don’t know why we bother,” the advisor, a former head of the International Aluminium Institute, told him.

Construction of smelter’s giant transformer – able to accommodate the equivalent of about a third of NSW’s average power load – was built in a year. The surrounding industrial park also included a huge carbon anode factory and eight different aluminium providing both inputs and making use of the smelter’s production – in one site.

That proximity meant, for instance, that hot aluminium at 800 degrees Celsius can supplied directly to users, avoiding the energy wastage of letting it cool only to be reheated later.

“They said they saved about 5% to 10% of the energy needs, and they gave me the data to show it,” Buckley said. “Tomago is sitting there in isolation. It, like most aluminium smelters, delivers product cooled down to room temperature.”

Hongqiao says it smelters use less energy per tonne of aluminium output. (Chart supplied by Tim Buckley)

Hongqiao, based in coal-dominant eastern China’s Shandong province, had been ordered to build its new facility in Yunnan to tap that region’s “really cheap renewable energy” in the south, he said.

Revenues from the industrial park had sourced from zero to 50 billion yuan ($A10bn) by 2025, and will hit 70bn yuan this year, with a target of 120bn yuan by 2030, he said, noting a second giant aluminium smelter-centric park had also been thrown up in a few years in Yunnan.

“[It’s] just staggering the scale of the economy there, and the scale and the speed of transformation,” Buckley said.

“[W]e do need sovereign manufacturing capacity to prevent ourselves from being 100% reliant on China,” he said. “Let’s just work out how we work alongside them and leverage them … because you will never catch them on their own.

China’s transformation doesn’t, though, imply firms are necessarily growing through specialisation. Hongqiao, for instance, invested $US1bn ($A1.4bn) in 2023 into an electric car maker, Rox Motor because “there’s a lot of aluminium” in both cars and batteries, he said.

The vertical integration extends the other way too, with Hongqiao buying into bauxite mines and alumina refineries, The latter includes a 1.2 million tonne a year refinery in west Africa’s Guinea, announced during Buckley’s visit to China.

Another company on his itinerary was the world’s biggest battery maker – Contemporary Amperex Technology Co. Limited, or CATL. The firm’s pace of research was “just staggering,” Buckley said.

The company boasts 700 professors among its staff and claims to issue about 17 patents per day. A floor in the headquarters in Ningde, in southeastern Fujian province, showcases CATL’s burgeoning patent holdings, he said.

CATL’s ambitions have extended into all aspects of storage, and includes a shipping division supporting 960 EV ships.

“They’re doing massive electrification of shipping,” Buckley said. “A tugboat needs a shitload of power for about 10 minutes when it’s towing a ship in. They can use batteries [and] so can all the canal barges.”

The company’s success in providing batteries for Chinese buses – an energy source that dominates new bus sales in the country – is on display at the CATL HQ. Cities large and small are show by their fleets of electric buses, with numbers often topping 10,000 or more in each urban centre.

Data centres have also drawn CATL’s attention – as it has for many businesses in the world.

The synergies for CATL are obvious – the company has mastered production of modular devices filled with electronics, not unlike some of the technology used by parts of data centres.

“Why don’t we do modular data centres?” was a question the company asked, Buckley said. The result is a separate AI division to extend CATL’s reach into the field.

The electrification of transport in what is already the world’s largest auto market has assisted China to weather some of the worst of the impacts from rising oil prices in the wake of the Iran War. The country is the world’s biggest importer of oil, sourcing much of it from Iran.

Oil use in China actually fell about 9% in the June quarter, helping to lower the nation’s carbon emissions in the process, according to Carbon Brief in a report out on Thursday.

China’s clean energy gains are avoiding emissions of millions of tonnes of CO2 annually – although the country remains the largest source of greenhouse gases. (Chart supplied by Tim Buckley.)

The country’s “commitment to decarbonisation is absolutely clear”, Buckley said. “There is zero doubt that, if anything, the war in Iran has just reminded China to doubledown on electrification and decarbonisation and energy independence.”

(Footnote: eastern China has been hit by multiple typhoons and severe storms this summer.

Ningde, where CATL is based, received more than 400 millimetres of rain in a day earlier this week, causing floods, according to social media.

A CATL spokesperson told Renew Economy: “[O]ur operations remain fully intact and running as scheduled.”)

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