China’s smelters flaunt high production rate amidst declining domestic aluminium price

The People’s Republic of China has some reports that display that the country’s aluminium output is estimated to continue at a high level. However, the price of this non-ferrous metal is heavily being downsized around the area.

According to Antaike, a metals research organization under the state, China’s aluminium producers will close the Q3 with a production rate of 10.42 million tonnes, outdoing the previous quarter’s total production ratio of 10.11 million tonnes. Data suggests that the fourth quarter might have a production rate of 10.54 million tonnes.

On the other hand, aluminium spot prices at the Shanghai Futures Exchange continue to sledge down the graph. August aluminium contracts are speculated at US$2,558 per tonne towards halfway through the month, with prices being the lowest in the past year. Acquired data from sources indicate that the declining prices might have cut open margins for the production ratio of aluminium to be constrained.

Wang Min from CRU Group exclaimed that in spite of this, China’s smelters are going to keep increasing the production rate.

“Smelters are still on track to ramp up production and or release new capacity following the money they made in 2021 and the first quarter this year,” as it was notified.

CRU identifies that half of the capacity in China would be at a loss for pricing aluminium at US$2,549 per tonne. As per the collected data of this week, the August aluminium contracts might be traded at US$2,677 per tonne.

Anonymous aluminium producers who did not wish to disclose their names spoke to sources saying that the newfound smoothness in electricity flow has encouraged many producers to improve their production capacity.

“Many producers just came back to the market with easing electricity controls, and they won’t easily halt production given the massive costs of idling furnaces and restarting,” as was reported by the aluminium producer. 

 “And the good profits they made over the last year could help to sustain their production even in a non-profitable environment,” the unnamed aluminium producer concluded.

In a broader sense, the price dissolution has stopped a substantial amount of discussion and forecasting regarding the spot market.

An unidentified trader who spoke to sources exemplified: “It’s hard to tell where the bottom is; cost is one factor, but it’s more about supply and demand balance as well as the macroeconomic performance.”