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Aluminum under pressure after China smog cutbacks fall short

Metal News - Published on Fri, 22 Dec 2017

Image Source: Reuters
Reuters reported that price of aluminum has struggled in recent months as authorities in top producer China have failed to fully implement temporary winter smelter closures to slash pollution. Lukewarm demand and new smelter projects in China are also poised to lead to more metal piling up, with inventories in the country already at record highs.

China has seen sizzling growth in aluminum production over the past decade and now accounts for around half of global output.

Benchmark aluminum on the London Metal Exchange has gained 23 percent this year, but has failed to make further headway after touching a peak of USD 2,215 a tonne in October, the highest level in more than five years.

On Tuesday, aluminum used in transportation, construction and packaging - was trading at around USD 2,090.

The rally in aluminum was largely driven by the announcement by the Chinese government of a crackdown on illegal aluminum capacity and temporary shutdowns of some production during the winter to curb pollution.

While around 3 million tonnes of annual illegal aluminum capacity has been shut down, there has been less success in suspending 30 percent of capacity from Nov. 15 to March 15 in 28 cities that suffer most from air pollution, said Eoin Dinsmore, principal consultant at CRU.

He said that “The winter closures are being less strictly implemented. Today, only about 600,000 tonnes per year of annual capacity has been closed.”

Mr Dinsmore added that compares to around 3 million tonnes of capacity that was due to be closed during the winter if the 30 percent target had been followed.

The world’s largest aluminum producer, China Hongqiao Group, has largely avoided steep cuts.

Official Chinese data showed China’s primary aluminum production fell for a fifth consecutive month in November to the lowest level since February 2015.

The declining trend in Chinese aluminum production is expected to reverse after the winter shutdowns conclude and new smelter projects ramp up, analysts said.

Mr Paul Adkins, managing director of consultancy AZ China in Beijing said that “Companies that are still profitable will seek to grow their output once the winter cuts are finished. We expect around 3.9 million tonnes of new capacity in 2018, centralized in Inner Mongolia and Guangxi provinces.”

Source :

Posted By : Rabi Wangkhem on Fri, 22 Dec 2017
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