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More production cuts are likely in Henan Aluminum smelters
Edited by : AL CIRCLE
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There are signs of increasing momentum in Chinese aluminum-smelter cutbacks, said Barclays Capital in a commodities research note. Some 500,000 to 700,000 metric tons of capacity per year has reportedly been shuttered in the top-producing province of Henan.
“More than half of smelters in Henan purchase their power from the grid and so have higher costs than smelters in northwestern provinces like Xinjiang, where an abundance of coal supplies allows smelters to access to lower-cost power,” Barclays added.
Analyst with Barclays added that, “Some of the cuts in higher-cost production have been offset by the ramp-up of this lower-cost capacity further inland, though we understand that the pace of ramp-up has been constrained by power availability (lots of coal but not enough power-generating plants) and lower prices creating a reduced incentive to speed up production.”
More production cuts are likely if aluminum prices fall and stay below RMB15,000 per ton and the prices are trading around RMB15,800, they concluded.
“More than half of smelters in Henan purchase their power from the grid and so have higher costs than smelters in northwestern provinces like Xinjiang, where an abundance of coal supplies allows smelters to access to lower-cost power,” Barclays added.
Analyst with Barclays added that, “Some of the cuts in higher-cost production have been offset by the ramp-up of this lower-cost capacity further inland, though we understand that the pace of ramp-up has been constrained by power availability (lots of coal but not enough power-generating plants) and lower prices creating a reduced incentive to speed up production.”
More production cuts are likely if aluminum prices fall and stay below RMB15,000 per ton and the prices are trading around RMB15,800, they concluded.
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