A00 Aluminium Ingot Prices again dip in China: SMM shows optimism for the future

After a sharp hike in A00 Aluminium Ingot prices in China from RMB 13660 per tonne to RMB 13740 per tonne yesterday, it again witnessed a slight decline today March 30, 2018. According to Shanghai Meta Market, the average prices have reduced to RMB 13620 per tonne. The prices are expected to range within RMB 13600 to 13640 per tonne and spot discounts are expected to settle at RMB 100 to RMB 60 per tonne.

However, despite the dip in prices, Shanghai Metal Market is optimistic about the future. It anticipates that aluminium prices will witness gain, as China plans to regulate captive power plants at aluminium producers with some support from higher power costs.

In order to snip thermal power capacity, the National Development and Reform Commission (NDRC) has already issued The Regulation Scheme for Coal-fired Self-supply Power Plants for public comment. This measure will require power plants to pay governmental funds, surcharges and costs for back-up power systems by the end of 2018, and those who will fail to pay on time will not be allowed to enter the power market.

These fees are likely to increase the production costs and erode profits as self-supplying power accounts for over 70 per cent of overall costs in aluminium production. In addition to this, the newly-added aluminium capacities are foreseen to slow down due to suspension at power plants under construction which did not have required permits.

From the end of 2018, this measure is expected to last for about three years minimum but may leave fewer lower-costs producers, since the overall costs in the aluminium industry will increase and cost curve will become flat.

Nonetheless, SMM remains positive and expects no alarming decline in production from higher-cost producers as they primarily rely on grid power.