Aluminum prices in China drop below cost - Chalco

Bloomberg reported that aluminum prices in China have dropped below the cost of production.

Mr Luo Jianchuan president of Aluminum Corporation of China Limited said that electricity rate increases will have a significant impact on smelters.

China said that last month it will increase power charges to curb overcapacity. Aluminum prices in Shanghai have slumped 18% this year and London Metal Exchange rates dropped 16% on concern Europe’s fiscal crisis will slow the global recovery and China’s curbs on lending and property speculation will cool demand.

Mr Fang Junfeng an analyst at China International Futures Company said that many producers are now operating below cost. Even if they start cutting output, it will be a while before reduced supply translates into higher prices. We could see prices fall to CNY 12,000 before any meaningful rebound.

Mr Wan Ling Beijing based analyst at CRU International Limited said that Producers in China are probably unprofitable as the current price is below the average CNY 15,300 output cost.

The government has ended discounts on electricity charges and doubled surcharges for high consumption companies. The provincial government of Henan, the biggest producer, banned new aluminum projects for the next three years.

CRU expects 1.3 million tonnes of capacity in the country to be affected by the surcharge. Energy represents as much as half the cost of producing aluminum.

Mr Li Yang an analyst at state owned researcher Beijing Antaike Information Development Company said that the cost of producing aluminum will increase as power charges go up and this is bullish for prices.

Meanwhile Mr Zhang Hao an analyst at CITIC Newedge Futures Company said that “Aluminum prices are meeting strong resistance on the way down because it has become unprofitable to make the metal. They have further room to fall, however we might find a floor soon, especially if output cuts come into play.”

(Sourced from Bloomberg)

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.