Help Desk -
9958816305, 9810335381
Email
Password

Chinese Aluminium Industry Hit by Coronavirus

Metal News - Published on Wed, 26 Feb 2020

Image Source: Reuters
Reuter’s columnist Mr Andy Home wrote that the outbreak of the deadly coronavirus could not have come at a worse time for the aluminium market. Global aluminium demand fell last year for the first time since the global financial crisis and expectations of a demand recovery rested on China, which showed encouraging signs of a manufacturing revival towards the end of 2019. The virus and the accompanying quarantine measures have since chilled economic activity, representing a short-term demand shock for the world's aluminium market. The fear is that China's aluminium smelters will keep churning out metal even as the country's demand implodes. Since China is the world's largest producer of primary aluminium, accounting for 56% of global output last year, this could have huge ramifications.

Aluminium usage is highly exposed to the construction and transport sectors, meaning a double short-term hit to end-use demand. Chinese construction activity is being hampered by quarantine restrictions on workers returning from Lunar New Year holidays. The more immediate concern is China's aluminium processing sector, which converts metal into semi-manufactured products. Most fabricators tend to close their plants or at least run at reduced rates over the holidays. Many are yet to restart, being in locked-down quarantine zones.

This processing chain disruption is causing a sharp build in aluminium stocks registered with the Shanghai Futures Exchange. ShFE inventory has surged by 224,508 tonnes to 409,635 tonnes since the start of January. Increases over the New Year holidays are the norm in China but the seasonal January-February build was a mild 75,000 tonnes last year and 88,000 tonnes in 2018.

This is a recurring nightmare for the aluminium market, which has spent much of the last decade working off the stocks accumulated during the global financial crisis of 2007/08. Then too demand collapsed but smelters carried on producing fresh metal.

Source :

Posted By : Nishith Sharma on Wed, 26 Feb 2020
Related News from Metal segment