Chinese aluminum smelters suffer overcapacity

According to China Nonferrous Metals Industry Association (CNIA), aluminum capacity in China reached 26 million mt/yr in 2012, against 20.27 million mt in output. The capacity utilization rate was 78%, the highest level since 2008.

Aluminum prices have been below production costs since August 2011. In 2012, aluminum prices averaged RMB 15,636/mt, compared with RMB 16,200/mt in average production costs, incurring losses on 93% of aluminum smelters. According to the 12th Five-Year Plan for Nonferrous Metal Industry, China’s aluminum output should reach 24 million mt at the end of the 12th Five-Year period. Zhao Xiufu, Deputy Director of Reform & Development Center of the Aluminum Corporation of China, said the output target stated in the 12th Five-Year Plan for Nonferrous Metal Industry has now been reached earlier, with 30% of aluminum capacity in surplus.

The Chinese economy is also plagued by high energy consumption and high pollution aluminum industry.

Production costs of aluminum smelters consist largely of power, alumina, prebaked anode and labor. Power accounts for over 50% of aluminum production costs. Rising power costs are one of the reasons behind the losses suffered by aluminum smelters in Henan. In fact, almost the entire aluminum industry is in the red.

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