Another bite has been taken out of the People’s Republic of China’s aluminium capacity this week, as the government of the Shandong province mandated 3.21 million metric tons per annum of capacity shuttered, most of which is operated by China Hongqiao.
According to a statement released yesterday but dated July 24, checks by the Shandong Development and Reform Commission (SDRC) identified the capacity as being operated without appropriate permits from the state. China Hongqiao was ordered to close 2.68 million metric tons per annum of capacity by the end of last month, and Xinfa Group was to close 530 thousand metric tons per annum.
The cuts to Xinfa’s capacity were the same as identified previously by the Chiping government last month. However, the cuts to Hongqiao’s capacity were in addition to the previously announced 2 million metric tons of outdated capacity the firm said it will be closing in the near future. Though the previously-announced cuts are to be replaced with more modern capacity, it is not likely that the same will happen for the capacity cuts mandated by the Shandong government.
Though it has hardly been a secret that cuts were in the offing, experts were caught off guard by the size of the cuts. This isn’t the last of the cuts either, as China’s Ministry of Environmental Protection (MEP) has dispatched eight teams to inspect aluminium smelters in Jilin, Zhejiang, Shandong, Hainan, Sichuan, Tibet, Qinghai, and Xinjiang over the next week.
According to AZ China’s Paul Adkins, the teams have been sent to places where air pollution isn’t known to be a problem, as Tibet is not known to house any aluminium production.
The cuts came as welcome news for aluminium traders in Shanghai, who pushed futures to US$2,330.30 per metric ton, which is the highest level in over 4-1/2 years.