Will Chinese aluminum smelters continue to cut losses in H2 2014: SMM

Aluminum prices have been on a bullish track in last one month. In the Shanghai market, the average spot price of A00 aluminum ingot gained 7.73% from Jun. 30 to 14,360 yuan per tonne on Aug. 29, according to the data of Shanghai Metals Market.

During 1H, domestic aluminum producers were able to cut down their loses due to the rising prices.

Chalco also reported a loss decline of 190 million yuan to 1.967 billion yuan during 2Q as a result of aluminum price gains.

It is apparent that reasonable gains in aluminum price will be the working factor in bringing down the loss for Chinese aluminum smelters.

Rising demand and continuous reduction in aluminium inventory are two major reasons behind recent aluminum price rise. However, the cut in China’s major markets and LME reportable aluminum inventories, however, is not enough to reflect healthy aluminum consumption.

According to SMM, Chinese aluminum producers now prefer selling molten aluminum directly to fabrication plants close by in order to produce aluminum bar, alloy, or ingot. This will reduce the supply of metal to east and south China and bring down the stocks there.

According to SMM data, competition in domestic aluminum bar market is growing fast. Growing supply and falling demand in the property market brought down processing fees for aluminum bar to 400-500 yuan per tonne from the 600-700 range.