China’s aluminum smelters to pare production on losses
Though Mysteel’s data shows the national average price for 99.7% aluminum picked up Yuan 44/tonne ($6.6/t) on week to reach Yuan 13,540/t including the 16% VAT as of last Friday, the price is much lower than the smelters’ average cash cost of at least Yuan 13,900/t, Mysteel notes.
“The high production costs come from the high prices we have to pay for alumina and prebaked anodes, while for a great number of aluminum smelters a major problem for a long time has been the electricity price. Luckily, in our case we have our own power plant which helps us reduce our costs,” said an official from Jiaozuo Wanfang Aluminum Manufacturing Co in Central China’s Henan province which hosts 450,000 tonnes/year of aluminum capacity.
As of March 1, the national average price for alumina was hovering around a high of Yuan 2,890/t including the 16% VAT, despite being Yuan 6/t lower on week or Yuan 11/t lower on month, Mysteel notes.
The average price of electricity in Henan for industrial use is around Yuan 0.55/kwh but Jiaozuo Wanfang’s power costs are only Yuan 0.33/kwh thanks to its captive power plant, according to a market insider close to the company.
That said, some 20 pots at Jiaozuo Wanfang’s smelter have been undergoing maintenance since the end of last month and aren’t expected to be brought back online until July or August, the market insider said. The idled pots could clip the smelter’s primary production by some 1,500 tonnes/month, Mysteel learns.
Some smelters, such as Shanxi New Material Co in North China’s Shanxi province and Nanping Aluminum Co in Southeast China’s Fujian province, finally decided they could no longer endure their huge losses. “They opted to slow down production and at the same time, discuss with local authorities about securing a decrease in the electricity price or are about being given some preferential treatment,” a Shanghai-based aluminum analyst explained.
Another smelter in Inner Mongolia Autonomous Region, Tongshun Aluminum Co, operator of a 115,000 t/y capacity primary smelter in Tongliao, has apparently suspended production completely and will transfer or sell its capacity quota in the future, according to the analyst. Mysteel’s efforts to contact the smelter were unsuccessful.
The analyst noted, however, that with smelters restraining their production, market concerns about a glut of primary aluminum forming have now abated. In fact, with downstream demand recovering, the prospect exists for aluminum prices to rise, he remarked.
Written by Anna Wu, wub@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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