China¡¯s aluminum capacity out of balance with domestic demand

Aluminum output in China is soaring, and according to the Ministry of Industry and Information Technology, approximately 10 million tons of capacity are being built. Meanwhile, in the West, run rates are finally coming down. Delay in closing plant among western smelters have finally turned into a consistent downward trend. September was 620,500 tons lower than the end of 2012, with cutbacks announced since the start of the year, totaling 1.2 million tons. The largest are generally leading, and Rusal is now cutting back some 648,000 tons or 15% of its capacity.

As the rest of the world struggles to bring the market closer to balance, notwithstanding the 10 million tons of metal sitting in exchange and off-market warehouses, China continues to add ever more capacity. So far, this has been contained behind a 15% export duty inhibiting exports of primary aluminum. But exports of semi-finished products have not been so stable. These totaled 2.3 million tons over the first nine months of this year, up 7.7%. In absolute terms, exports of semi-finished products have increased by 170,000 tons this year, according to Reuters.

This is more than the total aluminum semi production of the UK. It is not yet a flood, but if the wall of new primary capacity coming on stream in Xinjiang were to push the market in significant surplus, we could see Western markets under a rising tide of Chinese semi-finished product, particularly if that surplus costs less and can weather an extended period of lower prices.

It’s happened before with steel, though this trend has been held back across most base metals as a result of China growing faster than the rest of the world, creating demand in excess of domestic supply. But considering the super-cycle cooling, we may well be entering a period where China’s massive investment in plant and capacity is shown to be out of balance with domestic demand in some sectors – steel being one, and possibly aluminum being another. In that case, the capacity is going to go seeking export markets.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.