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Chinese Aluminium Smelters Reducing Production

Metal News - Published on Wed, 25 Mar 2020

Image Source: China Aluminium Production Cut Coronavirus COVID-19
Reuters reported that analysts estimate that Chinese aluminium smelters have cut their annual production capacity by up to 340,000 tonnes in response to a coronavirus-driven plunge in prices of the metal, chiefly by placing ageing pots under maintenance. Wood Mackenzie head of aluminium research Edgardo Gelsomino said “Aluminium at less than 12,000 yuan a tonne means nearly 70% of the Chinese producers will be under water, and that's certainly not sustainable. With operations cash-negative, some smelters have put expiring pots under maintenance but may choose to wait for better times before actually rebuilding them.”

China is the world's largest producer and user of aluminium, which is used in everything from cars to cans. China has around 36 million tonnes of annual aluminium capacity. Its smelters maintained high operating rates in January and February, even as demand from downstream manufacturers collapsed amid a shortage of labour following the coronavirus outbreak. The resulting build-up in inventories, coupled with a broad sell-off in commodities as the virus spreads overseas, saw Shanghai aluminium prices SAFcv1 touch 11,340 yuan ($1,603.94) a tonne on Tuesday, the lowest since February 2016. The price is down around 19% so far this year.

Compounding smelters' problems has been a rise in the price of key raw material alumina due to virus-related restrictions on bauxite mine supply and transportation.

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Posted By : Yogender Pancholi on Wed, 25 Mar 2020
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