Monthly Archives: May 2012
We enjoyed meeting up with old friends and making new ones during the conference last week. For those of you who were unable to attend this time, here’s a glimpse of what you missed:
Conference photos: https://v.youku.com/v_show/id_XNDA1NTgzMzQ4.html
Kungfu video: https://v.youku.com/v_show/id_XNDA1MDAxNzI4.html
Hope to see you all next time!
A series of announcements last night has changed the alumina production picture in China.
Chalco has announced it will reduce output by 1.7 million tonnes on an annual basis, cutting production at its plants in Henan and Shandong provinces. That’s more than 10% of their total capacity.
Meantime, 3 plants that take Indonesian bauxite have also announced production cuts. Nanshan, Xinfa and Weiqiao have announced a reduction of 10%, or 1.4 million tonnes. Another refiner, Chongqing Baise has announced cuts, though it does not take Indonesian bauxite.
In Chalco’s case, the move is necessary because they are among the highest cost producers in China. In Henan province, power prices are near the highest in China, and although they have the bauxite there, they are also losing market, as smelters in Henan have reduced output.
For the Shandong refiners, the move is a good one. In a market where demand from aluminium companies is relatively soft, and with higher costs from Indonesia, thanks to their 20% bauxite export tax, plus a temporary hold on exports while the Indonesians get their tax collection processes into place, the best move is to reduce production. Shandong refiners had steeply increased purchases of Indonesian bauxite ahead of the new tax, so there’s no point in consuming that relatively precious material for a soft market. Better to hold back production, keep the alumina price steady as a result, and allow producers who use domestic or Australian bauxite to “catch up”. By holding back, the market will adjust to a new norm in pricing, one which will include the Indonesian tax regardless whether the producer is paying the tax or not.
Meantime, imports of alumina from Australia have also jumped, as the domestic market spreads its risk.
At AZ China, we think the wash-up from this current wave of cuts will be a small rise in the price of alumina, maybe RMB200, though we probably won’t see the true pattern until the end of the third quarter. We expect alumina production in June to top out at about 3.1 - 3.2 million tonnes.
All in all, the latest move helps cement the common view that China is an expensive place to make aluminium.
The following story appeared in an online trade magazine today. It raises yet again the vexed question that the aluminium industry has yet to be able to answer comprehensively, namely, what to do with the red mud?
More after the article.
NANNING - About 67 hectares of farmland were submerged in south China’s Guangxi Zhuang autonomous region as of Tuesday after a sludge dump of an aluminum company began leaking Saturday.
Mud measuring over one meter in depth from the sludge dump of the Guangxi Huayin Aluminum Co., Ltd. entered the houses of some farmers in Jingxi county, according to a Xinhua reporter at the scene.
The sea of mud as well as red, polluted water have inundated the village. A total of 43 families have been affected, and they were relocated to tents set up on a mountain slope.
The county government has given out water and food to affected farmers, who will also receive a daily stipend of 30 yuan ($4.7) each from the company.
Heavy metal pollution has yet to be found in the mud, according to the regional environmental monitoring center. The cause of the incident is under investigation.
Guangxi Huayin Aluminum Co. Ltd, which mainly produces aluminum oxide at an annual production rate of 1.6 million tonnes, was established in 2003 and put into operation in 2007.
From memory, this is not the first time that a red mud incident has occurred in this area. In this case, it appears that no lives have been lost, which is a blessing, but it is yet another incident at a time when memories of the Hungary incident a couple of years ago are still fresh.
The problem is compounded by the fact that this is a problem that doesn’t go away when the company goes bankrupt or closes its doors for some reason. Around the world today, there must be many red mud ponds where the company who created the problem has now long since disappeared. But who maintains the ponds in this case? Who monitors the walls to check for seepage or deterioration of wall strength? Who alerts authorities if there is an incident at one of these “dead” ponds?
Individual producers, among them some of the world’s biggest mining and resources companies, may well take the high moral ground and defend their own measures. But this is an industry problem. The industry as a whole, inside China and outside China, needs to take responsibility, and take concrete steps for all the world’s operating and dis-used ponds. If the industry does not, it won’t take long before society and government does, and once the issue is out of the hands of the aluminium industry, there’s no controlling what the outcomes might be.
Hydro Norway has announced that its Kurri Kurri smelter in Australia is to be closed, for the loss of about 340 direct jobs (plus many others in support industries), and of about 120,000 tonnes of primary metal.
While this announcement comes as no surprise, it’s still a sad story.
Kurr Kurri is a small town in the picturesque Hunter Valley, about 2 hours north of Sydney, and about 30 minutes from the bigger Tomago smelter. The town is on the edge of a famous wine district and a large coal mining area, so at least some of the staff should be able to find jobs. Kurri Kurri means “beginning” in the local aboriginal language.
The Hydro announcement laid the blame for the closure on high power costs and a strong Australian dollar! Combined with depressed metal prices.
But I think there is another reason, though it may not be directly linked to this old, little smelter.
As we heard on Wednesday at the AZ China conference, China has been a strong exporter of finished and semi finished aluminium. Even though the price of raw aluminium is higher in China, once you get downstream, where labour and processing costs are mmuch lower, and the metal premium is not a factor, China can sell aluminium goods into Australia cheaper than if they were made locally. Effectively, it’s the same as Australia does in wool and iron ore - we sell China the raw materials, then buy back the finished clothing and steel. We sell alumina and bauxite to China, then wonder why our local aluminium industry, and broader manufacturing industry, is disappearing
The Hydro announcement did not give a timeline for the closure. But I expect it will happen quickly, possibly within 2 months.
There is a good sized group joining the optional Sunstone anode plant tour on Friday. If you are already registered for the tour, please make sure to arrive in the Shangri-la main lobby before 6:40am. The bus will leave promptly at 7am with whomever is on the bus at that time as we need to catch the train on time.
You will take a train to Dezhou and then a bus to Linyi arriving around lunchtime. The tour will be finished around 2pm. Please note the following train times from Dezhou to your final destination after the tour.
| Beijing | G126 | 15:32 |
| Jinan | D347 | 15:44 |
| Nanjing | G145 | 15:37 |
| Qingdao | D347 | 15:44 |
Sunstone will have staff on hand to answer any questions you might have. Enjoy the tour!
The final day of the conference will be focusing on carbon and other raw materials. We will begin at 8:30am with a full day of papers and another interesting panel discussion right before lunch. If you have any questions you’d like discussed by our expert speakers, you can text your question to +86 1366 1188 323. We value your feedback. Grab a orange conference survey before you go and let us know what we can improve upon in the future or what you especially enjoyed.
If you were unable to attend the conference but would like to purchase the conference papers, please email charissa.trahms@az-china.com.
The official start of the conference will begin at 8:30am in the City Wing Grand Ballroom 1. Please arrive by 8am if you have not yet registered or paid for the conference. We’ll have security at the doors so don’t forget your nametags. Lunch will be served at the Yum Cafe located on the 1st floor of the Shangri-la. Please give one meal card (located on the back of your nametag) to the hotel staff. We will have simultaenous translators for both days of the conferenc. Headsets can be rented for a deposit of 100rmb or $20. Please remember to bring cash or use your passport as a deposit an return the headsets if you need to leave the conference room. Let our staff know if you have any questions!
Welcome to Qingdao! We saw a few familiar faces already wandering around the Shangri-la. The registration desk will open at 4:30pm today and doors to the cocktail party will open at 6:30pm. If you have not yet registered or paid, please find Lisha at the Information Desk. After entering the main hotel lobby, you can find the conference registration desk to the right of the hotel check-in desk. Or simply ask the hotel staff where the City Wing Grand Ballroom is on level 1.
There’s just a few seats left for the optional Anode Plant tour on Friday. But today is the last day to sign up.
The speaker papers have just been sent to all registered delegates of the AZ China International Aluminium Raw Materials 2012 conference. If you did not receive your email with links to all the papers, please check your spam box or email lisha.li@az-china.com.
If you are planning to pay for the conference at the door, please note that we do not have credit card machines available; however, cash payment is acceptable.
For those packing over the weekend, the weather in Qingdao next week should be in the 70sF (24C) but there’s a cool breeze coming off the ocean.
We’d also like to mention that this year’s conference will be supporting a Beijing-based charity called Stars and Rain, which assists families dealing with autistic children. It’s one of its kind in China.
See you all on Tuesday!
The National Bureau of Statistics today released its figures for April, with aluminium production being recorded at 1.537 million tonnes.
This equates to 51,200t per day, a slight rise over the March number, and still below the figure recorded in February. This equates to an annual run rate of 18.7 million tonnes. That’s still well short of our 2012 prediction of 21.5 million tonnes for the year. But there are a couple of factors to bear in mind.
We have yet to see the big new smelters in Xinjiang start up full operations. We understand that some are waiting better market and input cost conditions. That new capacity should boost the number for the year.
On the negative side, the Weiqiao smelter is apparently still suffering from a catastrophic accident. That will remove at least 200,000t from the equation. Electricity shortages may also work against the industry, especially as we enter summer.
In our latest Black China Monthly Report, which was published one day before the April figures came out, we said we would retain the 2012 production forecast, but with a bearish tone. It won’t take many more bad news stories for us to ratchet the number down.
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