China achieves record high in August aluminium production

In August, China witnessed a 3.1 per cent increase in its primary aluminium production compared to the previous year, reaching a record monthly high. This surge in production was primarily attributed to the recovery of hydropower generation in the southwestern province of Yunnan. According to data released by the National Bureau of Statistics (NBS), China, the world's largest aluminium producer, achieved an output of 3.6 million tonnes of primary aluminium in the same period.

Compared to the previous month, the output saw a 3.4 per cent increase, with daily production averaging 116,129 tonnes in August, as calculated by Reuters.

During this reporting month, a survey conducted by consultancy firm Mysteel revealed that approximately 390,000 tonnes of annual capacity, equivalent to 32,500 tonnes of monthly capacity, resumed production, primarily in Yunnan. This resurgence followed earlier directives from authorities, mandating production cuts in China's fourth-largest aluminium-producing region from September 2022 to June due to insufficient hydropower capacity stemming from drought conditions.

The third quarter of the year witnessed a growth in operations in Yunnan, offsetting declining output in Shandong province, where capacity reductions were carried out as part of carbon emissions reduction efforts. Yunnan also experienced an increase in production due to improved profit margins, supported by government economic measures aimed at boosting the property market.

Housing, along with transportation and packaging, remains one of the primary sectors driving the demand for this lightweight metal. The most-traded aluminium contract on the Shanghai Futures Exchange registered a 3.8 per cent gain in the last month, marking the largest monthly increase since November.

Data indicates that in the first eight months of this year, China produced a total of 27.23 million tonnes of aluminium, representing a 2.9 per cent increase from the same period in the previous year. It is widely anticipated that September's production will match the August levels, as the majority of Yunnan's capacity has resumed production. The region continues to benefit from abundant rainfall and a stable water supply, suggesting that robust production levels are likely to be maintained throughout September and October, according to Li Jiahui, an aluminium analyst at Shanghai Metals Market (SMM), a local information provider.

However, there remains uncertainty regarding whether consumption will rebound significantly. Otherwise, the increased output could lead to higher inventories and potentially put downward pressure on prices, cautioned Li.

In addition to aluminium, production of other nonferrous metals, including copper, lead, zinc, and nickel, also witnessed a substantial 6.1 per cent year-on-year increase, reaching a record monthly high of 6.29 million tonnes. Year-to-date production for these nonferrous metals registered a 6.8 per cent increase, totalling 48.56 million tonnes. These metals include tin, antimony, mercury, magnesium and titanium.