Under the radar - baby smelter

Those of you who have been following China’s aluminum industry for some time will know that China has had several attempts at curbing old inefficient smelters, with modest success (for “modest”, read “almost none.”)

Back in 2004/2005 China outlawed any smelter that was under 50,000t capacity. The idea was to force Soderberg plants to close. But what happened was that smelter owners invested in pre-bake technology, which typically tripled plant capacity. That was the catalyst for the explosion in output through the second half of the last decade. That in turn laid the foundations for the explosion in capacity earlier this decade.

In the year or two following the Global Financial Crisis, smelter owners branched out west, making Xinjiang and other Western provinces the centre of a new huge expansion in capacity. At that time, the NDRC issued a new directive, this time ordering all smelters with amperage below 160KA to close. A previous directive ordering plants below 100KA had little effect on total output.

All this history came into sharp relief today. When I received the weekly report ready for editing, Kathy had included this little piece of news:

“Guangxi Xiangji Non Ferrous reduced 500 tons last week. Its nameplate capacity was 75Kt and the operating capacity is 37kt now.”

Sent this back to Kathy, saying it can’t be right. Smelters that small don’t exist any more. But after double checking, we found that the information is indeed true.

This smelter runs at 240Ka, so it is safe from the 2010 NDRC ruling. But it is a tiny smelter and should have been closed years ago. It isn’t closed, because the smelter has the support of the Guangxi government,

The thing is, this smelter is not alone in its tiny size. Another smelter called Zhenghao also runs at below 100,000t per year. The fact that they still exist despite all the rhetoric from Beijing says something about how rigorously the domestic rulings are enforced. And if these exceptions exist in aluminum, you can bet there are many more exceptions in coal and steel.

Thanks to www.smartbear.com for the use of their image.