Small surplus in forecast for China aluminium market in 2017

China's aluminium output in 2017 will grow at 10.3 per cent rate compared to production in 2016, the China Non-Ferrous Metals Industry Association (CNIA) reported.

The CNIA data shows there will be a surplus of 230,000 tonnes of aluminium in China market this year unlike in the global aluminium market where a deficit situation is predicted to continue.

China is presently undergoing extensive reforms as far as smelter operations are concerned. The government of Xinjiang has stepped up inspection activities all over the region to stop production at aluminium projects that violate rules. This has resulted in massive capacity cuts with Xinjiang Jiarun Resources closing 20,000 tonnes of capacity, and Xinjiang Qiya Aluminum and Sichuan Qiya Aluminum suspending work at their newly installed production lines.

However, it is unlikely that these smelting halts will rein in uncontrollable production of the metal in China. Rather, the government intends to make expansions in China aluminium industry in a more controllable and orderly manner and not by violating regulations anymore. 

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Market watchers observe that the ongoing supply side reform will have a limited impact on aluminium prices and soon there will be production restarts resulting in oversupply by the end of the year.