Midweek Recap… Aluminum, Hongqiao and all that jazz.

On Monday,

We received reports in our WeChat group that alumina prices jumped. Guizhou prices were at RMB2900/t and we saw one report of RMB3000/t being achieved.  As AZ China’s Monte Zhang put it, this is “crazy.” Our monthly aluminum report went out that morning.  If you are a subscriber but didn’t receive it, please let me know as soon as possible.
This month’s report is especially important, as it gives subscribers a complete analysis of the Replacement Permit situation, including who has bought them, which ones are still for sale, and the origins and ultimate purpose of the program.

Following our news that Shandong government has called for a more relaxed attitude on shutting down factories, some downstream factories are now re-opening.  That should stimulate demand in that area.  As well, there’s still plenty of fund money still looking for a position.

Tuesday,

We heard that Hongqiao has been offering small discounts (less than 50RMB per ton), on metal and alumina. We understand it’s all to do with generating some cash quickly.  Given Hongqiao’s cash cost of producing alumina sits at about RMB2400/t, they are still making money on their alumina trading, and given they have lost or are losing over 2 million tons per year of primary metal, that’s 350,000t per month of alumina that they don’t need.

We also played guess the number! Hydro Norway have been pretty pleased about their new instillation in Karmoy, and the numbers they gave in the press release show it is with good reason.

According to a story I read, they have 60 pots producing 75,000t per year, and are achieving a 15% reduction in electricity consumption. I am no technologist, but I ran those numbers through a calculator. It means that they are producing 3.4 tons of metal per pot per day. That puts their pots at the upper end of the amperage scale.  I am guessing somewhere near 500KA.  That sort of amperage traditionally comes with a high electricity specific consumption, though in the last 10 years most R&D has gone in the low-consumption direction.

Let’s assume they are are using 13,500KwH/t as their baseline.  Taking 15% off that puts them at around 11,500 KwH/t, which is truly remarkable.  Being Norway, they are running at a low electricity cost to begin with, but even if you assume US$10/MwH the numbers add up to a pretty big reduction on electricity costs.

There’s lots of assumptions and guesses in our numbers, so if you have a more accurate calculation, we would love to hear from you…

That brings us to Wednesday,

Stocks of 6063 alloy in the south of China now exceed 150,000t, and with producer and other inventory on top of the market stocks, we think the total inventory is somewhere north of 200,000t.

Paul received an email this morning from Petrocoque, announcing that their CEO Augusto de Carvalho has quit. He finishes at the end of the week. I have reached out to Petrocoque for more information.

We heard a story this morning that Zhongwang has purchased a German extrusion company. No word as to whether this story is true, nor which extrusion company.

When the Panama Papers story broke a while back, we did a corporate search of all China’s aluminium companies, and found that all but two of them were registered in China. The only exceptions were Zhongwang and Weiqiao, who were registered in BVI.

That’s it for our midweek recap, if you want to stay up to date with the latest in the industry sign up for our almost daily newsletter, 400USD if you’re not a subscriber to any of our reports, but if you are then it’s totally free. Contact steph@az-china.com for more information!

In case you missed it…

If you’re not already subscribed to our Almost Daily newsletter, then you probably missed it, so here’s the recap of the breaking news we got on August 18th.

“Shandong’s Zibo city government has issued a document that releases the screws, just a little, on the environmental inspections and the winter heating season cuts.

Essentially, the announcement that we just saw tonight is predicated on the principle that “one size does not fit all”.  The announcement says that if you are close to meeting the standards, and are working hard to meet the requirements, you need not shut down.

Zibo city does not have any aluminium smelters, though it does have some downstream factories.  Zibo, like many cities in Shandong, suffers from excessive pollution.  But the local authorities are now saying, “It’s okay, if you are working to meet the standards, and the impact is small, there’s no need to shut your factory.”

This is hugely important in the greater context, though not so much in Zibo. We understand the the authorities in Beijing have been disappointed with the over-reaction coming from some corners.  Factories were being ordered to close despite their hard work to meet increasingly tough standards, and local authorities were blindly applying a common rule to test everybody, regardless of individual circumstances.

This move by Zibo is likely to lead to other cities taking the same more relaxed attitude. As we understand this document, it applies not just to the winter heating season cuts, but across the board to the entire environmental push.  Local economics are now taking precedence over the national agenda.  They are saying, “environmental protection politics should not affect peoples’ lives.”

The document we have sighted is from Zibo city – there is no document from Beijing – yet.  It doesn’t mean that everything is returning to the bad old days of pollution, but it does mean that the government is seeking to correct the excesses appearing in the execution of their current strategy.”

What good is this information now you must be wondering, well, if you were subscribers to our list you would’ve gotten it right out of the oven, HA! But worry not, we’ll keep updating the blog with news, not as instant as the list, but relevant.

In case my very subtle strategy convinced you, reach out to ann@az-china.com or steph@az-china.com to enquire about our subscription to the list, or subscribe to our reports and get added to the list for free.

What’s been going on in China?

We’ve been working non-stop lately, those of you who are subscribers and therefore get our daily newsletter very well know, but for those of you who aren’t, here’s some info you might not want to miss.

On Sunday, (yes Sunday!)

We found out Shandong’s Nanshan Aluminiuim and Xinjiang Jiarun reached agreement on a management takeover. Nanshan will take operational control of Jiarun. This agreement will allow Nanshan to take over the smelter, which in turn will provide a surer metal flow guarantee for downstream customers.
We understand this “engagement” may lead to a full marriage in the future.

On Monday we covered the Hongqiao issues clarifying statement

“China Hongqiao, the world’s largest alumimum producer, and listed on the Hong Kong stock exchange, has issued a press release to clarify the situation with closure of illegal operating capacity.   I read the English translation 3 times, spoke with my Chinese staff, spoke with a Reuters  reporter about it, and still don’t quite understand what they were trying to say.”

We’ll keep you updated on that!

Fast forward to Tuesday…

The NDRC, together with the MIIT and 16 other government departments has issued some guidelines for defusing the risk of coal over-capacity.  According to the document, they will focus on eliminating backward capacity, shutting down enterprises that don’t meet mandatory standards, eliminating illegal capacity and controlling the roll out of new capacity.

Does all that sound familiar?   To me, I could remove the word “coal”, and replace it with the word “aluminum” and the policy would not change…

Would love to share the entire story with you dear readers, but it wouldn’t be fair to our beloved subscribers.

Last but not least, this month on THE BLACK CHINA REPORT, we report on the rising price of petcoke, as well as some changes in the market for anodes.  Overall, anode quality petcoke is still short, and in some areas is quite tight, With the Winter Heating Season cuts just 3 months away, some smelters in China have started stockpiling anodes.

For those of you interested in enquiring about our reports contact: steph@az-china.com for further information and remember we are offering non-subscribers access to the mailing list for a fee of US$400 for an annual subscription.  If you aren’t a subscriber and you want to continue receiving this newsletter do not hesitate to contact the above mentioned email.

 

 

Recap of last week

If you’ve been following our almost daily emails you very well know last week was extremely eventful, but for those of you who haven’t here’s a brief recap:

The “fake news” meme travelled West to East. From the West Wing of the White House to Lake Yanxi in Beijing, so before lunch time on August 2, a fake news story got into the Chinese aluminium market.  Chalco was alleged to have mentioned in their management meeting that Weiqiao would be closing 2.6 million tons of capacity by October 15.  As soon as that story leaked, Shanghai took off, and so did Chalco’s share price.

August 3rd:

As recently as the end of June, we were quite skeptical about the strength of the initiative to cut illegal capacity. I remember pointing out to someone that Xinjiang Jiarun had slowed down their cuts, the local government in Xinjiang had removed the notice from their website, and even the 250Kt cuts at Hongqiao were only a token cut.

As recently as one week ago, we still thought there was some question about whether all the illegal capacity would be shut.  East Hope had slowed down their cuts, and the big two in Shandong province still had hopes of avoiding cutting all their illegal capacity…

August 4th:

What’s going on with Marpol VI?

China has designated all the major coastal shipping zones as areas needing special controls on the fuel used in those zones.  (We have maps of the coastal zones if anyone is interested.)

China has implemented a set of staged deadlines for the introduction of low sulphur marine fuel, with milestones running out to the end of 2019.  These will have the effect of ensuring that China is compliant with the IMO rules when they start in 2020.  However, that doesn’t mean that China is directly complying with the IMO.  The rules that China has laid out for itself derive from its fight against air pollution.

Remember that starting in August, we are offering non-subscribers access to the mailing list for a fee of US$400 for an annual subscription.  If you aren’t a subscriber and you want to continue receiving this newsletter.  Contact Ann at ann@az-china.com