Aluminium Supply Increases Globally

Aluminium Supply Increases Globally

Global aluminium supply rose by 5.7% to 63.5 million tonnes in 2017, as per Rusal. In the world excluding China, supply grew by 1% to 27.2 million tonnes, while Chinese supply increased by 9.5% to 36.4 million tonnes. In China there is strong evidence of the implementation of Supply Side reform in the Chinese aluminum industry in 2017 with more than 10 million illegal operating capacity and project cuts. As a result, according to Aladdiny data annualized Chinese aluminum production in November has dropped to 35.4 million tonnes from its maximum of 38.6 million tonnes in July of 2017. The announcement by the Chinese regulator regarding winter capacity cuts which have now been implemented will result in an annualized production losses of approximately 1 million tonnes of metal, and 4.4 million tonnes of alumina, according to UC RUSAL estimates. As estimated significant part of aluminium closed smelters during current winter cuts season will not return to the market due to sevear environmental regulation for smelters emissons in 26+2 cities, high restarting costs and current low profitability. Larger losses may take place in carbon materials supply including anodes and coking coal, that would to exert an upward pressure on the costs bases for aluminium producers due to squeezes in raw materials supply chain. Strong antipollution controls and environmental measures continue to be focused towards the energy intensive industries in China in 2018 with intention to further cap and reduce CO2 emissions. Several heavily aluminium producing provinces plan to curb CO2 emissions by 20-23% on average by 2020 from the 2015 level. Starting this year Chinese aluminum smelters start paying environmental tax potentially increasing production costs by 70-100 RMB/tonne for big producers. In addition to China domestic regulatory measures, Chinese semis exports stay under significant pressure from international anti-dumping initiatives and there has been recent announcements for further investigations under Section 232 alongside the possible introduction of new duties on Chinese semis exported to the US. This may result in a continued drop of exports of Chinese FRP and other aluminium semis products to United States, the second largest Chinese semis consuming market.

Updated On 17-Mar-2018

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