Beijing Expresses Fear Over Domestic Alumina Overcapacity
10 January 2019 by Staff
Noting the significant uptick in planned alumina projects in the country, China’s government expressed concern that the domestic alumina industry may soon find itself in the midst of unsustainable overcapacity.
Late last month saw The National Development and Reform Commission and the Ministry of Industry and Information Technology issue the Notice of Promoting Orderly Development of Alumina Industry in an effort at drawing attention to the problem. Citing challenges including the U.S. government’s sanctions on Rusal, mandatory production curtailment at Alunorte, and labor issues at Alcoa’s refinery in Australia, the report noted the consequent rise in global prices which, in turn, led to a jump in new alumina projects.
However, the year’s closing weeks saw resolutions to many of those problems, pulling alumina prices back to Earth and closing the arbitrage window that made exports of alumina so lucrative. Washington has promised to back off of sanctions on Rusal due to its compliance with their guidelines, light appearing at the end of the tunnel for Alunorte thanks to agreements it has reached with the Brazilian government, and an end to labor troubles at Alcoa’s plant have helped return a significant measure of stability to the alumina market.
A significant amount of capacity remains nevertheless. Chinese refineries turned out 70.31 million metric tons of alumina last year, almost three times above 2017’s total production. The year witnessed a nationwide growth of capacity of 5.43 million metric tons last year, on top of an additional 6.8 million metric tons per annum added in 2017.
According to SMM’s numbers, alumina peaked in China last year at CNY3,321 per metric ton. On Monday the Shanghai market for aluminium closed at CNY2,928 per metric ton, down by 12 percent from 2018’s high. The consultancy expects there to be more room for the price to fall, but it says the worst is likely over. Supply challenges in the year may buoy prices, but SMM says it expects a yearly best of no more than CNY3,300 per metric ton.