Chinese Aluminium Smelters Announce Additional 800 Thousand TPA In Production Cuts

Chinese Aluminium Smelters Announce Additional 800 Thousand TPA In Production Cuts

Recognizing the damage excess capacity continues to wreak upon the country’s aluminium market, the People’s Republic of China’s top smelters agreed on Friday to ax a minimum of 800 thousand metric tons per annum of smelting capacity in the next several months.

An official from the meeting’s host, the China Nonferrous Metals Industry Association (CNIA), said the amount agreed upon at the gathering represents the volume of output that the representatives of the 20 firms expected to reduce in the short term.

According to Antaike, the research branch of CNIA, the meeting’s attendees included representatives from China Hongqiao Group, Aluminum Corp of China Ltd (Chalco), Xinfa Group, Hangzhou Jinjiang Group, and East Hope Group, among others.

Per Antaike, 2018 has seen the shuttering of 3.2 million metric tons per annum of aluminium production capacity thus far, the lion’s share (80 percent) having come at the latter half of the year. Adding in the capacity cuts announced at last week’s meeting, 9 percent of China’s total aluminium capacity has been switched off since the beginning of the year.

With operating pressures on Chinese smelters “reaching the extreme limit,” Antaike said that current conditions in the Middle Kingdom has already dove beneath the depths of the slump of late 2015, when last the country’s top smelters met. At the last such meeting, smelters gathered to agree upon cuts of half a million metric tons per annum of capacity.

Though the cuts are ostensibly intended to do away with overproduction, not all experts are predicting a long-term net drop in output. Paul Adkins of AZ China opined to Reuters that the cuts announced Friday are meant to make room for newer, more efficient production, which the Shanghai traders soon realized.

“Market participants were eager to see some sort of leadership from the major producers … But the meeting couldn’t even deliver a bullish message to the market,” he said.