Rising Chinese production reigns in global aluminium prices

China is showing no signs of slowing down on exports. Surging shipment volumes of aluminium off the Chinese ports are becoming contentious while prices of the metal used in automobiles to beverage cans continue to hover just above their six-year low.

Despite a dip last month, China’s aluminium exports are up 14.4% so far this year, according to official data, as companies there take advantage of their ability to produce at a lower cost than international rivals to seize market share.

While major aluminium companies like U.S.–based Alcoa Inc. have cut production this year, Chinese output has risen by 18% year-to-date, according to the International aluminium Institute, a supply flood that has helped keep prices depressed. The major factors playing crucial for the smelters to stay productive are power tariff cuts by the State authorities and falling prices of coal.

Benchmark three-month aluminium futures were trading at around $1,492 a ton on the London Metal Exchange in late Asia Tuesday, October 10, slightly higher than a six-year low of $1,462.50 a ton touched on October 29.

It is unlikely that China will cut back soon, meaning few expect any imminent recovery in aluminium prices. Chinese producers have added about 3 million tons of new annual smelting capacity this year, and could add another 1 million tons before year-end, says Ivan Szpakowski, a Hong Kong-based Citibank analyst.