Category Archives: Aluminium fluoride
AZ China has completed its analysis of the cash cost curve for Q2 2014. Overall, costs went down, but not enough to save many producers.
The analysis threw out many interesting details:
- The average cash cost of production came in at RMB14,150/t (US$2,280). This is a reduction of 2% over Q1.
- The spread of costs ranged from below RMB11,000 (US$1,775) to over RMB16,500 (US$2650).
- Costs went down primarily due to government subsidies reducing the cost of electricity, though the falling price of coal helped some smelters to achieve a lower electricity cost without bureaucratic intervention.
- Surprisingly, alumina costs went down. Cutbacks in primary metal production earlier in the year left the market long in alumina, forcing the price down. With Indonesia no longer supplying bauxite, this input cost is set to rise.
- Other input costs also went down. Anode prices fell thanks to the cost of carbon falling, while over-supply of ALF3 caused that market to reduce prices.
Across the quarter, Shanghai metal prices rose 5% over the lowest price seen in 2014. This and the falling costs have provided relief to the financial performance of smelters. The “break-even point” along the x-axis has shifted right a little, crossing at about the 30% point.
For the record, AZ China has 129 smelters in the total population, but we exclude any smelter which has less than 2 years of data. This means new smelters which are still “bedding down” are excluded, as are smelters which have been idled. Based on our selection criteria, 73 smelters qualified for this analysis.
There will be a more detailed analysis issued to our subscribers. If you are not on our mailing list, please contact us at blackchina@az-china.com.
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Energy
With Iraq tensions increasing, crude oil prices climbed to a new level and stood at $107.26/t last week. Focussing on the domestic market, the coal price fell further due to high inventory. A situation that leads traders with a negative outlook to think the price will go down.
Alumina and aluminium
Import prices remained stable last week, however imported material is uncompetitive when compared with domestic alumina. For aluminum, there is no positive change in the downstream market. On-demand procurement volumes were limited to sustain price increase. Last week, aluminum price went down slightly.
Raw material of AL
Although downstream demand continued be weak, refineries controlled their output to a relatively low level which helped petcoke prices stabilize. With oversupply and tighter cash-flow within the industry, they can’t push the prices up easily. Additionally, as demand for aluminum in the main market has shown no sign of a rebound, the price might drop again.
ALF3 price continued to rise due to the low inventory levels, increasing by ¥50/t WoW. For good news, fluorspar prices started to rise slightly.
Sometimes, tough medicine is needed. But right now, in the Chinese aluminium industry, pain killers are being handed out, when what’s really needed is some stronger medicine.
Since the beginning of June 2014, more and more smelters that shut down in recent months now plan to restart. The motivation was not the rising prices or increasing demand, but local government pressure. In exchange for restarting, local governments will guarantee a subsidy to reduce the losses. For instance, most smelters in Gansu province have received a subsidy of 0.03/kwh, especially for non-captive power plant smelters. Meanwhile, Guizhou province has issued subsidies to Chalco Guizhou, Chalco ZunYi aluminum, and others. The rumored subsidy was 0.12/kwh in Guizhou province because their original power price was much higher than other provinces.
These subsidies are just a pain-killer which might bring more potential painful problems.
Local governments have to protect their tax revenue, and they have to protect jobs. Many aluminium smelters are the hub of local industrial zones, with feeder industries that employ ten times the number of employees in a smelters. But with more smelters restarting, aluminium prices will fall once again. Soon the low metal price will trigger other capacity shutdowns - and a vicious cycle begins!
In short, the subsidy may ease the current pain, but for a long- term solution, surgery is needed, not just medicine.
As always, these actions from local governments are not uniform. Based on our analysis, the subsidies so far seem to be favouring state owned enterprises. The small guys are missing out.
Dear readers, our latest “Weekly Report Review” has been published. if you have any questions, please tell us. Thanks!
Energy
Iraq tensions drove oil price up sharply last week. But domestic coal prices remain stable. Although coal consumption is increasing in summer, but potential negative factors continued to work, especially high level stock and decreasing ship transport fee.
AL
Compared with increasing spot alumina price, limited trade volumes of imported alumina continued to suppress prices, which still remain at a low level. However, aluminium prices continued to climb slightly.
Raw material of AL
After a adjustment in petcoke prices, last week both anode and fuel grade coke prices remained stable. But for anodes, because of long term weak demand and reducing exports, anode prices declined last week.
For other product, ALF3 rose further last week due to the low level inventory. The total aluminum fluoride stocks held by the 17 main plants decreased by compared with April.
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Dear readers, our latest “Weekly Report Review” has been published. If you have any question or need please tell us, thanks!
Weekly Report Summary: last week, most products prices remain stable.
Energy
Due to good US nor-farm data and ECB reducing rates, Crude oil price rose slightly last week to $102.66/t. But coal prices remain at a low level because of domestic weak demand and passive sentiment.
Aluminium and alumina
Imported alumina prices fell again last week due to domestic sluggish aluminium market and weak demand. Overall aluminum price showed a slightly increase to ¥13,295/t although the price is unlikely to rise much more.
Raw materials
Although recently low sulphur grade coke prices continued to fall, anode grade pet coke prices remain stable. Under the situation, other products prices remain stable except aluminum fluoride.
ALF3 low level price increased by ¥50/t because of low inventory.
Do Fluoride Chemicals has announced a halt on trading of their shares.
DFD’s shares are listed on the Shenzhen stock exchange. The company has announced that there is to be a major announcement or event, and that because of this and in the interests of fairness for its shareholders, it asked the stock exchange to halt trading effective March 10.
Our check of the rumour mill so far has not yielded any leads as to what the event or announcement might be. Since this is a public domain, I will not speculate. We will keep watch on the company and any announcements, and keep you posted.
This blog reported back in 2011 about the law suit that Chenco GMBH, the Germany-based supplier of aluminium fluoride technology, took against Do-Fluoride, better known in the aluminium industry as DFD.
DFD is China’s and perhaps now the world’s largest supplier of aluminium fluoride to the aluminium industry. It has several plants in China, and the original law suit was based on whether DFD was liable to pay royalties to Chenco. According to the law suit, DFD had purchased a licence for one plant, but then went on and built additional capacity without paying Chenco for the technology. DFD in its defence claimed that the original technology had serious flaws, and that they had had to re-engineer the technology. Subsequent capacity built was based on DFD’s own re-engineered technology, according to their defence.
Links to our original stories on this are here and here.
Chenco eventually won that law suit, in May of this year. The International Chamber of Commerce Court of Arbitration ordered DFD to pay to Chenco:
- EUR 100,000.00 per month starting on 23 March 2011, and continue to pay such monthly penalty of EUR 100,000.00 on the 23rd of each following month, as long as DFD uses Chenco AlF3 technology, however, no longer than until 31 August 2016 (23 Mar 2011 – 31 Aug 2016 = 65 months);
- further EUR 320.000,00 as damages;
- interest amounting to 5 % p. a. on all claims and penalties awarded;
- DFD shall not use CHENCO’s technology until all aforesaid penalties are paid;
- Costs of the arbitral proceedings are payable at a quote of 15% by DFD and 85% by Chenco;
- all payments shall be net of Chinese taxes.
DFD moved to dispute the ruling in the Swiss Federal Supreme Court of Appeal, but subsequently withdrew the appeal.
According to the latest press release from Chenco, however, DFD have refused to pay the fines. Chenco has therefore sought to “domesticate” the ruling, by taking their claim to Chinese state courts. Chenco is looking to have China ratify and enforce the ruling. There is no indication as to when China’s judicial system will rule on this.
This is a very interesting case, on several levels. For us in the aluminium industry, it raises questions for buyers as to whether they continue to purchase from DFD in the knowledge of the law suit and the ruling. For DFD’s competitors, the same door opens - no doubt sales people around the world will be raising this question. But the question of Chinese company allegedly copying technology and being punished for it, and for that punishment to be enforced in China, will catch the attention of many companies around the world that face the same problem.
We will keep you posted on this.
China’s aluminium fluoride industry is not out of trouble yet.
Readers may remember we posted here and here about the recent woes in the industry. In May, most producers closed their doors for the month, and production dropped to only 12,000 tonnes. Exports that month also dropped, to only 4,000t.
But the industry re-opened its doors in June, and production rose to 43,000t. (Export figures will be available in our monthly report, due out next week.)
Trouble is, they took all that pain, but got little gain in return. At the end of April, just before the industry took the shutdown, the domestic price was hovering at about RM9,000 (US$1428). At the end of May, it was still at RMB9,000. Now, at the end of June after a month of the plants running again, the price has dropped to RMB8700 (US$1380).
We think the industry association will almost certainly call for another “holiday”. Their only hope right now is that we provinces such as Henan giving power price subsidies to smelters to keep them open, perhaps demand for ALF3 will be strong enough to support the industry. But it’s a slim hope.
China’s aluminium fluoride (ALF3) producers have been working to try to bring the industry under control for some time, but it seems from the latest data they may be succeeding finally.
May’s production of ALF3 in China fell to only 12,000 tonnes. The usual level is around 50,000t. April was down to 30,000t, so the slowdown actually started at the end of March.
It was at about this time that the major producers came to an agreement to slash production, in an attempt to improve the price.
Export data is not available until the end of the month, but the figure for April was 11,000t, which is about the regular level. We estimate that China’s domestic primary aluminium industry uses around 35,000t per month. Clearly this strategy of closing capacity is going to have an immediate effect on price and supply for both the domestic and the export market.
We will keep watching closely.
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