Production resumption and capacity expansion may further bring down aluminium price

According to Shanghai Metals Market, the prices of aluminium should come down due to expected growing supply against closing of the peak-demand season. Incentive policies as well as falling power costs are the factors that will encourage the idled capacities to resume their work and the setting up of new plants. SMM analyst says this will bring the prices down.

Production work resumption at the idled capacity will mainly be in Guizhou province. It will be followed by a RMB 0.12/kwh power subsidy to the local aluminium smelters for restarting the production work and this would further connect equate to a rate of RMB 0.44/kwh to gird operators. The provincial government has reserved RMB 80-120 million for the smelters that have resumed operations in idled lines and even encouraging these smelters to start their power plants, said SMM.

According to latest survey by SMM, it has been found that Chalco (Guizhou) has plans of restarting six electrolytic cells per day for 48 days starting on 24th May. The 288 electrolytic cells represent a total aluminium capacity of about 175,000 mt/yr. Other smelter in the province of Guizhou like Zunyi Yulong Aluminum is considering the restart of a capacity of 30,000 mt/yr. Another smelter named Yunnan Dongyuan Qujing Aluminum also has plans of reopening 150,000 mt/yr of their idled capacity as the power plant it purchased will cut down the power costs significantly.

Besides resumption of the production of idle capacities, there are other smelters planning to start their new capacity online in the month of May with a number of capacities scheduled to stat in June.