Primary aluminium recap: Yunnan province begins 1.5 MT output cut; Indian aluminium companies reduce product prices by INR3000/t

The primary aluminium industry, which is considered to be an epicentre of the aluminium value chain, is always spotted with crucial occurrences. This week was no exception, and the most vital event was the commencement of productions at aluminium smelters in Yunnan. This phenomenon is expected to reduce 1.5 million tonnes of production out of the total capacity.

The production cut started on November 1 with the onset of the dry season till April 2024. Yunnan province is known for abundant availability of hydro power but that entirely depends on rainfall. Lack of rainfall from November to April generates less hydro energy, causing interruption to aluminium output.

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Huaxing Aluminum's electrolytic aluminium production department has been completed and successfully placed into operation, marking a significant milestone in their operational experience. The automated control system update project is near the plant's pressurised pumping station, rainwater collecting pool, bathroom, heat exchange room and heating room. This update has resulted in a reduction in employee labour intensity, an improvement in work efficiency, and an enhancement in the stability of power equipment operation and the intelligence level of the company's equipment.

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This week, the LME aluminium benchmark price displayed an overall bearish trend although it started on a very high note. AL Circle’s price chart shows the LME aluminium price initiated the week on Monday, October 30, with a surge of US$81.50 per tonne but then declined through the rest of the week by US$32.50 per tonne to settle at US$2,219.50 per tonne.

China’s domestic A00 aluminium ingot price, on the other hand, showed growing trend this week, with only one intermittent decline of RMB 70 per tonne on October 31 to RMB 19,080 per tonne. On the previous day, October 30, the SMM A00 aluminium ingot price recorded a leap of RMB 240 per tonne from RMB 18,910 per tonne to RMB 19,150 per tonne, on the news that Yunnan, the fourth-largest primary aluminium producing region in China, was contemplating to cut 1.5 million tonnes of production for this year’s dry season. From November 1, China’s domestic A00 aluminium ingot price started growing as Yunnan commenced the cut.

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In tandem with LME aluminium price fall, Indian aluminium giants like Hindalco and Vedanta cut their aluminium selling prices this week. Both Hindalco and Vedanta reduced their aluminium ingot price by INR 3,000 per tonne this week to INR 218,750 per tonne and INR 216,000-236,000 per tonne, respectively.

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According to data revealed by the US Census Bureau this week, the United States primary aluminium production in August 2023 dipped by 2,000 tonnes or 3.13 per cent month-on-month to stand at 62,000 tonnes. The average daily output was 2,000 tonnes, down by 2.91 per cent from 2,060 tonnes in July 2023.

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A source reported this week that many Chinese leading aluminium companies posted a downfall in their operating income for the first three quarters of 2023. According to the source, risen operation costs of aluminium smelters driven by domestic alumina price hikes could be attributed to the drop in operating income. Yunnan Aluminium’s operating income was recorded at RMB 12.091 billion during the third quarter, which was down by 5.27 per cent year-on-year. The company’s net profit also shrank by 9.85 per cent during the same period to RMB 990 million.

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At the beginning of this week, China’s social inventories of aluminium billets marked a decline of 5,900 tonnes over the weekend, standing at 107,700 tonnes as of Monday, October 30. The decline in inventories could be attributed to the increase in shipments compared to the arrivals of stocks to warehouses. During October 24-30, aluminium billet shipments in major Chinese consumption areas totalled 47,300 tonnes, up by 16.79 per cent from 40,500 tonnes a week ago.

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