Chinese aluminium exports increase even as oversupply remains

Excess aluminium production in China is damaging the prospects of aluminium producers in the rest of the world, purely because of the size of China’s massive aluminium industry, observed analysts at MetalMiner.

As prices on the Shanghai Futures Exchange have risen this year, idled smelters have restarted and new capacity has continued to come on-stream.

Annualized run rates increased by almost 650,000 mt over the course of April and May, Reuters reports, with May’s average daily output of 86,290 mt the highest since November 2015 before prices fell below $1,518 (10,000 yuan).

The other factor apparently effecting Beijing’s attitude is the rapid rise in capacity is coming from new state of the art low cost aluminium smelters in China’s Northwestern provinces. Aluminium is not seen as an old-fashioned, state-dominated industry operating polluting plants close to urban areas.

China’s new aluminium capacity is cutting-edge, world-class technology and — at current prices at least — is making money. As a result, analysts conclude capacity is unlikely to be trimmed anytime soon, at least by government intervention. For aluminium producers outside of China, that is not good news, and although recent rises in price to $1,600/mt are better than the $1,450-1,500/mt levels of late last year, it doesn’t offer much upside in the short- to medium-term if China keeps flooding the market with excess semi-finished products.