On July 17th, just before the future contract transferred from 1707 to 1708, the SHFE active aluminum price surged to RMB14500.
Xinjiang Jiarun had shut down all its illegal 150kt aluminum capacity by the end of last week.
Xinjiang East Hope has shut around 180 pots with around 250kt capacity.
Today, we received the confirmation that Shandong Xinfa will shut down 530Kt of aluminum capacity due to they do not have the Environmental Impact Assessment (EIA). If you subscribed to our weekly report, you will see Shandong Xinfa has around 1.1 million tons of high purity aluminum project has no EIA. Currently Xinfa declared they will close around half of this capacity. We believe they will wait and check what the top government will do to them once they started closing these pots, before they continue with the balance of illegal pots. In the meantime, we believe they are trying very hard to get their environmental assessment to be approved now.
Since 2013, many provinces in China said they will not approve new aluminum projects, so how easy Xinfa can get their paper work approved is unknown, but we know it will a very difficult process.
As well, Shandong Weiqiao stopped purchasing prebaked anodes for its 300KA pots. Shandong Weiqiao’s two plants with 300KA pots did not meet the environmental standard. They may have to shut down these two plants with around 420Kt capacity. Although Weiqiao did not say they will close these plants, the stopped purchasing of anode is a clear signal.
As China’s largest aluminum production province, Shandong has now cut 1.2 million tons plus Weiqiao’s previous 250kt cut. That is a big number in China from one province.
The cut from Shandong plus last month’s cut from Xinjiang Jiarun and East Hope, we believe China is taking the aluminum supply side reform seriously this time. If China will take the cut capacity seriously, the illegal capacity in Inner Mongolia will also face closure risks. At that time, we will see aluminum price remain in high range this year.
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Picture reference: https://cutproduction.wordpress.com/