January aluminum Production

IAI published the January aluminum production volume yesterday. China’s January aluminum production number was reported as 2950Kt. It equals to around 95Kt daily production.

Compared to last December’s aluminum production 2891Kt, this is not a big rise at all. Early February, SMM published the January aluminum production volume with 3038Kt. That was around 98Kt per day. This record was higher than the IAI data. Which number is more reliable?

Based on our pipeline report, the January operating capacity was 37,507Kt. From our research, we believe the true number was about 3,185Kt.

January is still in the low season for aluminum and the downstream factories closed earlier for holidays in the middle of January. Despite expectations that the price would drop with reduced demand, the aluminum price performed quite strongly thanks to the speculation funds. The environmental control draft document that we have discussed previously created nervousness in the market. Orders from downstream factories to replace their stock levels after the holidays also supported the price. In the meantime, the high raw material costs - energy, alumina and carbon - also supported prices. In summary, rising aluminum production did not lead to a fall in price.

In January, we saw at least 185Kt restarts of capacity and 436Kt new capacity in the market. With so much new capacity in the market, the production volume of 2950kt is almost certainly too low.

February will likely see a small reduction on the daily run rate, as we have seen the first plants idling due to the high input costs and tight money supply.

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