Mounting aluminium prices narrowing profit for fabricators: Shandong Nanshan Aluminium

On 14^th October 2021, the Chairman of Shandong Nanshan Aluminium Co, Lu Zhengfeng stated that in 2021, the Chinese aluminium processors experience diminishing profits anticipated to mounting metal prices.

The metal aluminium that is utilised in making of beverage cans to aeroplanes, witnessed a surge of over 50% as of now this year on the ground of robust demand and production curbs due to a severe power crisis and flooding in China, global master of aluminium production.

Lu Zhengfeng said: “Aluminium prices have jumped significantly (and) increasing freight charges, price spreads and exchange rates are all having a big impact on processors.”

On 13^th October 2021, the profusely traded November aluminium contract on the Shanghai Futures Exchange surged to its towering point since 2006 May at RMB 24,165 per tonne. On the same day, the three-month aluminium price on the London Metal Exchange climbed to $3,118.50 per tonne an extent that was not seen since July 2008.

“Revenues for fabricators this year to be weaker than in 2020 and for them to face an even harder time after October,” Lu Zhengfeng expects.

“The upstream high aluminium prices have already transmitted to fabricators, and fabricators have to transfer the costs to the downstream sector.”

Moreover, he commented: “It is uncertain whether aluminium end-users would accept that.”

Energy prices have attained record highs in recent days, navigated by electricity shortfall across Asia and Europe, while China’s distress is anticipated to undergo through to the end of 2021 and fold growth in the second-largest economy world.

Apace with steel, high power-intensive aluminium smelting is expected to be one of the most dented metal sectors.

Eoin Dinsmore, CRU’s head of primary aluminium and products said: “Aluminium smelting is seven times more power-intensive than copper smelting, so aluminium is really the sector that gets hit pretty hard.”

In 2021, the State Reserve Bureau of China released 280,000 tonnes of aluminium so far, in an effort to soften prices, however, Lu Zhengfeng said “The sales volume was “too small” and would not have a big impact.”