ANALYSIS-China setting up for aluminium supply bubble

On the surface, China's aluminium smelters have little cause to complain about intensifying pressure from provincial governments to step up production.

After all, domestic prices have outperformed the global market because of a Beijing-backed buying plan and investment in the power sector, while discounted electricity rates have taken pressure off the cost side of the equation for some smelters.

Trouble is, a rush to restart production now may sow the seeds of an even worse price collapse unless Beijing imposes restrictions to turn back a surge in imports, expected to soar beyond 100,000 tonnes in March, 10 times recent monthly averages.

Whether Beijing and provincial governments decide to prick the supply bubble will be key to deciding how long the world aluminium market remains sunk under the weight of surplus stocks.

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