Pipeline Report and 2016 new capacity

AZ China’s latest Pipeline Report has now been released. The data reveals that 2016 is not likely to be as heady as previous years.

The Pipeline Report shows that in 2016 there will be 8 projects completing construction. That will mean something over 2 million tonnes of new capacity (Subscribers to the Pipeline Report have the precise details).

The question remains, will these projects turn on the electricity and start producing metal? The CNIA says that there will be no new capacity additions in 2016, but there are lot of reasons why that promise will be sorely tested. The CNIA promise carried no regulatory or legislative underpinnings, and was drafted at a meeting of only 14 smelters out of the nearly 100 in China. As well, those building new capacity will have bankers looking to see some return on the investment. Given that these new smelters will sit in the 1st quartile on the cash cost curve, a low metal price will be no barrier.

Platts recently quoted a Broker named Galaxy Futures as saying that China would have 7 million tonnes of new capacity available in 2016. We find this extremely hard to believe. As our latest Pipeline Report shows, even if you add all the capacity that will be ready in future years, it is hard to get to this number.

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