China's top five alumina producers to cut output from June

Five major Chinese alumina smelters have jointly called on local peers to reduce output by 10% from June, in the hope of stabilizing the market.

The move aims to “reduce risks for alumina producers, and to maintain normal operations of the industry”, according to a statement on an official industry website metalchina.com.

The advocators include Aluminum Corp of China (Chalco), Nanshan Group, Xinfa Group, Binzhou Hi-tech Aluminum & Power and Bosai Group.

The call came after China’s alumina imports more than doubled in April, when local aluminium smelters increased imports in the face of climbing local alumina prices and anticipation of disruption of bauxite shipments from Indonesia.

China’s alumina imports totalled 280,000 tons in April, up 115.4% year-on-year. For the first four months of the year, imports rose 73.7% to 1.44 million tons.

In April, China’s aluminium output rose by 6.7% year-on-year to 1.54 million tons, leaving the first four months’ output at 6.1 million tons, up 10.7% year-on-year, according to data from the National Statistics Bureau.

Market participants, however, remained wary on how much the advocated production cut will help aluminium prices.

“This is positive news, yet its help [to aluminium prices] may be limited, as aluminium output is still rising quickly,” Yang Xiaoguang, Shenzhen-based analyst of Jinrui Futures, said.

“Aluminium has been suffering oversupply for quite a while, and smelters will not cut much production unless prices are much below their costs, or there is power shortage,” Xu Maili, Shanghai-based analyst of Donghai Futures, said.

The five smelters have a combined capacity of 30.8 million tpy and as a whole account for 61% of China’s total alumina capacity.

They operated 78.25% of their capacity in May and produced a 2 million tons of alumina, and are expected to reduce output to 1.8 million tons in June, according to Liu Lei, research head of Baiinfo.com.