Capacity cuts - nibbling away

Readers of our weekly reports will have seen that some more aluminium capacity has exited the market recently.

Capacity has been cut at two more plants, including a plant in Inner Mongolia. That’s significant because Inner Mongolia is one of the “new” provinces where the big new smelters are being built. But this smelter was built in 1993. The plant has also announced that it has put an expansion project on ice.

The number of plants cutting capacity is growing, and these two cuts add to the growing list. But there’s still capacity coming in the near future, so the net reduction is somewhat muted.

As we head to the end of the year, the market is no less clear on direction than it has been for the last few months. Central government efforts to boost consumption have delivered little, while regional governments keep smelters propped open. We are yet to hear if the SRB will buy any metal, just as we are yet to learn if Beijing will remove the 15% export tariff on raw ingot. Will we see more capacity cuts once we get past the new year? Will Beijing launch new measures to boost the economy? Or will the push on cleaning up the pollution levels hit China’s aluminium industry? Remember, China’s aluminium industry consumes roughly 10% of all China’s electricity, so that’s a lot of coal.

We at AZ China will soon be issuing some more information to clients on what is happening, and likely to happen. To make sure you are the first with the best insight into what is happening inside China, take up a subscription with one of our weekly or monthly reports.

Here’s a contact form for you.