Over a Quarter of China’s Aluminium Capacity May Be Illegal

Numbers recently released by the government of the People’s Republic of China indicate that over one-fourth of the country’s smelting capacity is operating in violation of environmental regulations.

According to a report published on a popular Chinese news site, the of the 44.673 million metric tons per annum operated by the domestic aluminium industry, five million metric tons per annum of it is operating illegally at the present time, with another seven million metric tons per annum of smelting capacity currently under construction. If the illegal capacity under construction that is replacing existing obsolete capacity is removed from the equation, China’s illegal capacity under construction weighs in at 3.5 million metric tons per annum, according to the report.

Despite assurances to the contrary, the aluminium capacity operating outside the bounds of the law is higher this year than last. The report in question indicates that China’s overall aluminium production capacity ended 2016 at 43.2 million metric tons per annum, with 36.5 million metric tons per annum of capacity then in operation. However, only 30 million metric tons per annum was operating legally, as 6.5 million metric tons per annum then in operation violated Chinese law, with another 6.7 million metric tons per annum of illegal capacity sitting idle.

While the cuts to date have been modest, the process of making them continues. Of the four stages outlined by Beijing earlier this year in its quest to effect meaningful supply-side reform, two phases are now complete. The second phase, which involves local governments stepping in and culling capacity, ended yesterday. Special checks will be carried out on aluminium capacity through mid-September, followed by supervision and mediation, which will be conducted for a month afterwards.

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