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Key takeaways:
The world’s largest ferro-alloy producing nation is increasingly focused on reducing the energy-intensive industry’s substantial carbon footprint, especially after recently announcing a 25-70% green electricity requirement on producers of steel, cement and polysilicon.
But the transition to eco-friendly methods is far from uniform across the country.
Southern China’s ferro-alloy smelters largely depend on hydropower, which is abundant during the wet season from May to October. But while this offers a cleaner production method, its seasonal fluctuation leads to unstable output.
“Since May, our plant has been gradually ramping up the production of furnaces with the increase of hydropower from our own power plants or from other independent generators,” one southern ferro-chrome smelter source told Fastmarkets.
“The addition of hydropower in our energy grid can not only offset the power shortage during summer consumption season, but also facilitate lower carbon emissions development. But in the dry season, our production activities have to fade,” the southern smelter source said.
“Hydropower-driven smelters in Yunnan and Sichuan provinces often face curtailments outside the rainy season, forcing them to fall back on coal-powered grids,” a Guangxi-based ferro-alloy trader said.
This seasonal dependency has been a recurring issue, evident in 2023 and 2024.
In contrast, northern China benefits from a more consistent supply of wind and solar energy, enabling year-round green power access for producers.
Inner Mongolia, a key ferro-alloy hub, reported 124.7 billion kWh of new energy power generation in the first five months of 2025, leading national new energy development.
“We can access clean energy all year long,” a manganese alloy smelter source in northern China told Fastmarkets, noting that challenges such as transmission and storage of green electricity are being addressed.
“The continuous usage of green power is a major difference we have against southern smelters, especially in dry season,” the northern smelter source added.
Ferro-alloy production is heavily concentrated in northern China, which is seeing more green and reduced-carbon ferro-alloy supplies and capacity expansions.
This is partly due to facility upgrades and technological advantages in northern smelters, which often utilize larger, more efficient furnaces.
“Silico-manganese smelting furnaces with size below 25,000 kVA are mainly located in Guangxi and Guizhou provinces in the southern part of China, while furnaces in the north, especially in Inner Mongolia, are 30,000 kVA or even bigger,” a silico-manganese smelter source told Fastmarkets.
“Bigger furnaces have higher efficiency and lower energy intensity – or simply, the alloy products are greener,” the source added.
Furthermore, northern China exhibits a more concentrated demand for green ferro-alloys, driven by stricter environmental policies and proximity to major steelmaking hubs in northern and eastern China.
“Inevitably, ferro-alloy smelters in the north prevail in both supply and demand for green alloy products,” a ferro-alloy trader source said, calling it “the result of natural selection.”
While demand for low-carbon ferro-alloys is growing nationwide, southern China’s fragmented supply chain is struggling to meet it.
“I heard a small number of buyers in Guangdong are now paying premiums for green ferro-silicon, but local output can’t match northern volumes,” a Shanghai-based ferro-alloy analyst noted.
Government policies are also contributing to the regional disparity. Northern provinces are more actively pursuing carbon footprint research and developing derivatives markets that support green ferro-alloys.
The Zhengzhou Commodity Exchange offers financial incentives for certified green ferro-silicon and silico-manganese, with most certified smelters located in the north of the country.
Ningxia province, another northern ferro-alloy hub, is advancing carbon footprint calculations and standard research for the industry, alongside initiatives to encourage local governmental departments and state-owned companies to purchase low-carbon products.
“Most importantly, Ningxia will encourage the local governmental departments and state-owned companies to purchase low carbon footprint products, which will drive the development of green development in the region,” a second ferro-alloy trader told Fastmarkets. “It doesn’t mean southern smelters are not active in green transition, but the resources and opportunities for northern ones are obviously outnumbering.”
Despite nationwide carbon-neutrality targets, southern provinces often prioritize grid stability, sometimes permitting coal-powered back-up for ferro-alloys.
Conversely, northern regions such as Xinjiang face stricter renewable mandates, with subsidies favoring wind or solar-powered projects.
“The north is policy-driven, whereas the south is more market-adaptive,” the Shanghai-based analyst noted. “Without grid upgrades and inter-regional coordination, China’s clean ferro-alloy ambitions could remain unevenly distributed – and costly – for years to come.”