INSIGHT: Hydrogen emerges as new pathway in China’s aluminium decarbonization

SINGAPORE (ICIS)–China is turning to hydrogen as a potential lever in efforts to decarbonize its aluminium industry, as regulators tighten emissions rules, and global buyers demand greener materials.

While still in early stages of deployment, hydrogen is gaining attention for its possible role in high-temperature heating, increasing renewables in grid, and emissions reduction. The move aligns with China’s broader ambition to peak carbon emissions in the aluminium sector by 2025 and support global net-zero targets by 2050, as set by the International Aluminium Institute (IAI).

• Carbon market expansion enhances hydrogen’s value in aluminium
• Early adoption may offer global market edge
• Significant potential, but barriers remain

In March 2025, China’s Ministry of Ecology and Environment expanded the national carbon trading market to include aluminium, steel, and cement – raising market coverage from 40% to more than 60% of national emissions. This inclusion means aluminium producers will face growing pressure to curb emissions or bear rising compliance costs.

The High-Quality Development Plan for the Aluminium Industry (2025–2027), recently released by the Chinese government, makes clean energy substitution a policy priority. The strategy encourages increased use of renewable electricity and pilot applications of hydrogen in key production processes.

EMISSIONS PROFILE HIGHLIGHTS DECARBONIZATION URGENCY
China’s aluminium sector is responsible for 85% of emissions in the country’s nonferrous metals industry. In 2023, aluminium-related emissions hit 530 million tonnes, including 420 million tonnes from electrolytic smelting, according to the China Nonferrous Metals Industry Association.

In 2024, the country produced roughly 43.7 million tonnes of electrolytic aluminium, around 60% of global output.

In 2023, China produced about 41.59 million tonnes of electrolytic aluminium, and the segment consumed over 500 billion kilowatt-hours of electricity, with each tonne of aluminium requiring at least 12,000 kWh and emitting an average of 12.7 tonnes of carbon dioxide (CO2), according to the National Bureau of Statistics, National Energy Agency and Ministry of Ecology and Environment.

Most emissions are tied to primary production. Industry estimates suggest over 95% of the aluminium sector’s emissions stem from upstream processes such as mining, refining, and smelting, with energy use (electricity and heat) accounting for three-quarters of the total. Coal remains the dominant power source in China’s aluminium sector.

The IAI and International Energy Agency (IEA) outline three primary decarbonization pathways: transitioning to low-carbon electricity, reducing process emissions, and boosting recycling rates.

GREEN ELECTRICITY TARGETS DRIVE INFRASTRUCTURE INVESTMENT
The IEA estimates the carbon intensity of aluminium’s power supply must fall by 60% by 2030. Globally, about 55% of aluminium smelters rely on captive power.

In China, more than 60% of aluminum smelters owned captive coal-fired power generators by September 2023, according to Ministry of Ecology and Environment.

Electricity represents 30%-40% of aluminium production costs in China, according to industry sources. With renewable energy uptake still limited and preferential electricity pricing being phased out, aluminium producers are under pressure to diversify power sources and enhance flexibility via storage.

The Chinese government requires the sector to raise clean electricity use to above 30% by 2027, up from less than 25% in 2023. This is spurring investment in hydropower, wind, solar, and hydrogen storage.

Shanghai Metals Market data show green electricity accounted for over 25% of smelting power in 2024. In provinces such as Yunnan, Qinghai, and Sichuan, the share exceeded 80%, while coal-dominant Xinjiang and Shandong remained low at below 5% in 2023.

One pilot example is Dongfang Hope Group’s Xinjiang facility, which uses a wind-solar-hydrogen integrated system to meet 95% of its electricity demand, positioning it as a “zero-carbon aluminium” site.

HYDROGEN GAINS TRACTION IN HIGH-TEMPRETURE HEATING
Reducing non-electric emissions – especially from alumina refining – presents another challenge. Emerging technologies such as mechanical vapor recompression (MVR), electric calcination, and hydrogen-based burners are being tested, although large-scale deployment remains years away.

Hydrogen’s high heat value and clean combustion make it a candidate to replace natural gas or coal in calcination and smelting. The IEA’s Hydrogen Review 2024 highlights multiple global trials:

• In Australia, Rio Tinto and Sumitomo are piloting hydrogen calcination at the Yarwun refinery with a 2.5 MW electrolyser and a retrofitted calciner with a hydrogen burner.
• Norway’s Hydro tested aluminum smelting fired by hydrogen and produced 225 tonnes of green aluminium at its Navarra plant in Spain, approved by electric vehicles manufacturer Irizar.
• Tokyo Gas and LIXIL in Japan tested hydrogen heat treatment for aluminium, finding no impact on product quality.

Hydrogen-based aluminium production still carries a steep price tag – up to $5,000 per tonne versus $2,000 using conventional methods. Analysts say the economics could shift if green hydrogen costs fell below $2 per kg.

In China, Aluminum Corporation of China Limited (Chalco)’s Qinghai subsidiary launched a 15% hydrogen blend in natural gas for anode calcination, cutting CO2 emissions by 370,000 tonnes annually.

CARBON TRADING ADDS FINANCIAL INCENTIVE
With the aluminium sector now in China’s emissions trading scheme, carbon becomes a direct item in aluminium companies’ cost structures.

The government supports reducing Scope 2 emissions – those from purchased electricity – via renewable energy contracts and green certificate (REC) purchases. These instruments allow companies to offset emissions and potentially trade surplus emissions carbon allowances.

China issued 80 million RECs in 2023, but aluminium producers bought less than 5%; with expanded policy incentives, this could rise to 15–20% by 2027, according to industry sources.

Green hydrogen, as a quantifiable emissions reducer, may also be monetized through carbon credits.

China’s aluminium decarbonization strategy depends on simultaneous progress across power substitution, process innovation, and recycling. Hydrogen is not the only solution, but it is fast becoming part of the mix.

Though significant development potential for adopting hydrogen, there are still barriers ahead. High hydrogen production and logistics costs, limited infrastructure with few cost-effective delivery routes to factories, and underdeveloped technologies like hydrogen calcination will continue to limit scale-up.

Still, with the carbon market expanding and global demand for green aluminium rising, for China’s aluminium companies, investing early in hydrogen may help secure a greener foothold in an increasingly climate-conscious global supply chain.

Analysis by Patricia Tao

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