The Australian
China takes shine off the aluminium story
Edited by : AL CIRCLE
2 min read
Patricia Mohr, who heads commodities research at Canada's Scotiabank, puts it more circumspectly, but she is convinced the world's most populous country can be struck off future marketing plans of Western aluminium producers.
In her latest monthly outlook, Mohr describes as "extraordinary" the fact that China is building a new aluminium industry in northern and western provinces, particularly Xinjiang, based on the ready availability of thermal coal for power generation. Chinese authorities recently estimated Xinjiang had about two trillion tonnes of coal.
She writes that the new Xinjiang smelters have cash costs about 5 per cent below the world average and are quite competitive, unlike many high-cost smelters in eastern China.
The full digital experience
"China continues to aim for aluminium self-sufficiency, thwarting industry hopes that China will emerge as a significant net importer," Mohr said. Global aluminium prices have lifted above cash costs this month, helped by Alcoa announcing permanent smelter shut-downs, talk of smelter output cuts in Norway and the general improvement in base metals sentiment.
Even if demand in China picks up, there is likely to be spare domestic capacity. China, according to some reports, may idle one-third of its aluminium smelter capacity. Power costs are rising and shaving profit margins.
The quarterly commodities report out of French bank Natixis sees another reason for a downturn in aluminium demand as Chinese authorities try to constrain production of energy-intensive, low-quality goods.
Natixis sees LME inventories -- now near five million tonnes -- as weighing on the aluminium market.
Tightening credit conditions won't help.
On the bright side, the report looks to the US auto industry as one positive.
Average fuel efficiency in vehicles has to rise by about 3km per litre by 2016 and by more than 8.5km per litre by 2015.
As Americans still by and large prefer their cars big, this means more substitution by aluminium of other, heavier metals.
Natixis, unlike Scotiabank, thinks China will become a net importer because its smelters will become uncompetitive due to rising energy and labour costs.
In her latest monthly outlook, Mohr describes as "extraordinary" the fact that China is building a new aluminium industry in northern and western provinces, particularly Xinjiang, based on the ready availability of thermal coal for power generation. Chinese authorities recently estimated Xinjiang had about two trillion tonnes of coal.
She writes that the new Xinjiang smelters have cash costs about 5 per cent below the world average and are quite competitive, unlike many high-cost smelters in eastern China.
The full digital experience
"China continues to aim for aluminium self-sufficiency, thwarting industry hopes that China will emerge as a significant net importer," Mohr said. Global aluminium prices have lifted above cash costs this month, helped by Alcoa announcing permanent smelter shut-downs, talk of smelter output cuts in Norway and the general improvement in base metals sentiment.
Even if demand in China picks up, there is likely to be spare domestic capacity. China, according to some reports, may idle one-third of its aluminium smelter capacity. Power costs are rising and shaving profit margins.
The quarterly commodities report out of French bank Natixis sees another reason for a downturn in aluminium demand as Chinese authorities try to constrain production of energy-intensive, low-quality goods.
Natixis sees LME inventories -- now near five million tonnes -- as weighing on the aluminium market.
Tightening credit conditions won't help.
On the bright side, the report looks to the US auto industry as one positive.
Average fuel efficiency in vehicles has to rise by about 3km per litre by 2016 and by more than 8.5km per litre by 2015.
As Americans still by and large prefer their cars big, this means more substitution by aluminium of other, heavier metals.
Natixis, unlike Scotiabank, thinks China will become a net importer because its smelters will become uncompetitive due to rising energy and labour costs.
Previous article
UC RUSAL to increase its stake in Yaroslavsk GRK to 100%
Next articleAluminium record set in 2011
Grow with
AL Circle
_md.webp)
