China State Council confirms aluminium smelter capacity will be under “rigorous control”

China’s Work Safety Commission of the State Council has confirmed that domestic aluminium smelter capacity will be under “rigorous control,” a news that drove aluminium contracts at the Shanghai Futures Exchange up to US42,500 per tonne.

The Shanghai Metals Market weekly average aluminium price also continued to rise sharply in the week ending August 25. The weekly average aluminium price gained by US$50.12 per tonne to stand at US$2,422.53 per tonne as on Friday, August 25.  

China State Council has been supervising production safety checks across the country since August 7-18. The inspection teams have come up with suggestions for rectification for the polluting factories which will be the focus area for further inspection works to be conducted in September.  

SMM observed that there was a slight pickup in downstream purchase; yet, surplus existed in overall supply in east China aluminium market. Traders were found to be engaged in cautious buying.

As per SMM data, mainstream aluminium traded prices were 16,190-16,210 yuan per tonne in Shanghai, discounts ranged at 230-210 yuan per tonne over SHFE 1709 aluminium, prices in Wuxi were 16,180-16,200 yuan per tonne, and that in Hangzhou were 16,190-16,210 yuan per tonne.

Industry experts see risk in aluminium price uptrend. They think that higher aluminium prices could encourage smelters outside of China to increase their production thereby capping further rises. However, China’s supply side reforms seem to be currently working for the aluminium industry players.