China's aluminium market faces mounting supply in H2

China's oversupply of aluminium is likely to escalate in the second half of 2013 as more new capacity is set to come on stream, further reducing the need for imports by the world's top consumer and producer of aluminium.

Imports have already tumbled 67 percent in the first half from a year earlier, official data showed.

China's mounting supplies would also weigh on domestic prices, which AL-A00-CCNMM have fallen more than 5 percent so far this year, said Zhang Chenguang, analyst at information provider SMM.

Beijing has tried unsuccessfully to limit aluminium capacity and last month further tightened regulations for new and existing smelters. Analysts and smelter sources said the regulations would not cut production this year, but would limit expansion in the longer term.

China has more than 27 million tonnes of annual capacity currently. Some 10 million tonnes of capacity was being built, according to a report on the Ministry of Industry and Information Technology website (www.miit.gov.cn).

Analysts expect China to add more than 3 million tonnes of new aluminium smelting capacity this year and the bulk would come from the northwestern remote region of Xinjiang.

In Xinjiang at least 1.3 million tonnes of capacity would start up in the second half, compared with around one million tonnes of new capacity in China in the first half, said Zhang.

State-backed research firms Antaike and Aladdiny estimated China's aluminium production at about 12 million tonnes in the first half of 2013, with June output over 2 million tonnes.

The estimated figures appear higher than official data, which showed 10.58 million tonnes in the first half, with a record 1.843 million tonnes in June.

Consumption in the first half had risen about 10 percent from a year earlier as demand from the construction, home appliance and transport sectors grew, said the executive at a large smelter, who expected demand to stay firm in the second half.

Reflecting a pickup in demand, stocks of aluminium ingots in four major industrial cities -- Shanghai, Wuxi, Nanhai and Hanzhou -- fell to about 740,000 tonnes currently, from a record of 1.234 million tonnes in March, data from SMM showed.

Antaike had forecast real consumption would rise 8 percent to 23.2 million tonnes this year. The firm has revised up the 2013 prediction, said its senior aluminium analyst Yao Xizhi, who did not provide a figure.