The data from the National Bureau of Statistics (NBS) revealed that the primary aluminium output in China, the world's largest aluminium producer, increased to 6.74 million tonnes in January-February 2023 from 6.33 million tonnes in Jan-Feb 2022.
According to official data released on Wednesday, China's aluminium production increased 7.5 per cent in the first two months of 2023 as the economy improved and demand expectations rose due to lifting strict COVID-19 controls, marking the greatest output for the two months since at least 2015.
Several policy changes to support China's economy and real estate market, along with the lifting of COVID restrictions late last year, have raised expectations for a rise in domestic demand for aluminium used in packaging, transportation, and construction.
The benchmark aluminium contract on the London Metal Exchange rose to a seven-month high of $2,658.50 per tonne on January 25. Participants noted that producers' motivation to operate was also influenced by profitable market circumstances and increased domestic pricing.
"The power curb in Yunnan is likely to constrain supply," said Liu Xiaolei, an aluminium analyst at Shanghai Metals Market, forecasting that China's primary aluminium output will rise around 3 per cent this year.
Mysteel estimated that in January, industry profits were 1,063 yuan ($154.48) per tonne; in February, they were 1,670 yuan per tonne. Northwest Gansu Province saw the addition of new production capacity in January and February, and smelters in the southwest, including Guizhou, Guangxi, and Sichuan, increased output. The country's electricity supply might constrain aluminium output growth even with this.
As a result of the power supply crunch, the southwestern Yunnan province asked its local aluminium producers to reduce their power usage in February further. He added that declining demand for primary aluminium would have a negative effect on China's exports of aluminium products to Europe and the United States. Compared to a year ago, the production of 10 nonferrous metals, including copper, aluminium, lead, zinc, and nickel, increased by 9.8% to 11.92 million tonnes in January and February.
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