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China to add 2.39 mil mt/year new aluminum capacity in H2: SME

China is forecast to add new aluminum smelting capacity of 2.39 million mt/year in the second half of this year, Shanghai Metal Exchange said in its aluminum sector report Monday.

The country added new aluminum smelting capacity of 2.06 million mt/year in H1, or 46% of the estimated 4.45 million mt/year total new national capacity for 2017, data from SME showed.

SME’s forecast of new Chinese national aluminum output capacity this year is close to that predicted by state-run metals consultancy Beijing Antaike.

The agency told an industry seminar in Bejing in April China is to add 5 million to 5.5 million mt/year new aluminum smelting capacity in 2017, in the provinces of Shandong, Shanxi, Guizhou, as well as the autonomous regions of Inner Mongolia and Xinjiang.

SME said Shanghai Futures Exchange’s aluminum futures prices hit Yuan 14,670/mt ($2,201/mt) last week. But with mainland Chinese aluminum producers’ output cuts having come to a halt, market players now focus attention on China’s aluminum supply surplus.

Key Chinese aluminum producer Hongqiao Group confirmed to S&P Global Platts its 250,000 mt/year output cutback in mid June.

Due to the addition of new aluminum capacity in China, domestic aluminum prices may face face downside pressure from rising aluminum stocks, SME said.

Aluminum stocks at SHFE’s warehouses in the provinces of Guangdong, Jiangsu and Zhejiang and Shanghai City were 456,362 mt as of Friday, up 1,716 mt from July 21, SHFE data showed.

Antaike data showed China consumed some 3.02 million mt of aluminum in April, up 8.4% on the year, citing higher demand from the domestic real estate, car and home appliance sectors, key aluminum consumers in China.

China had a national aluminum surplus of 85,000 mt in April, down from a surplus of 230,000 mt in March, its data showed.

Antaike predicted China’s national refined aluminum output in 2017 to hit 36 million mt, up 10.3% year-on-year.

The agency forecast China’s aluminum supply and demand to be in balance in 2017, with a surplus of 230,000 mt for the whole of this year.

It said due to the narrowing production cost differences in the mainland Chinese aluminum smelting sector, investment in the aluminum industry is forecast to turn from high speed growth in the past years to more slower, stable growth in the 13th Five Year Plan period (2016-20).

Antaike predicted the conflict between China’s aluminum capacity growth and aluminum stock increase to ease in the next few years, supporting domestic aluminum prices in the long run.

China added a cumulative new aluminum smelting capacity of around 13 million mt/year from May 2013 to April 2017, of which 12 million mt/year have been put into use, but of which 3 million-4 million mt/year capacity does not comply with the rules set by National Development and Reform Commission, data from Antaike showed.

On April 14 this year, Changji City in Xinjiang Uyghur Autonomous Region, Northwest China ordered the closure of three aluminum smelting projects with aggregate capacity of 2 million mt/year, data from Hong Kong International Mining Association showed.

As of end-2016, China had aluminum smelting capacity of 43.2 million mt/year, with operating capacity of 36.5 million mt, Antaike data showed.

Shandong, Xinjiang and Inner Mongolia were the top three aluminum production zones in China, accounting for 27%, 17% and 9% of China’s national aluminum capacity last year, its data showed.

China had new commissioned aluminum capacity and resumed aluminum capacity that totaled more than 6 million mt/year in 2016, mainly in the provinces of Henan, Shanxi, as well as Southwest China and Northwest China, data from Antaike showed.
Source: Platts

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