BLACK CHINA BLOG

18
April

More closures to come?

By: Paul Adkins | Comments: 0 | Category: Aluminium

It seems likely more closures of smelters will occur later this year.  This follows the weekend’s disclosure that Beijing has ordered closures of 3 smelters in Xinjiang, for a total of 2 million tons of metal units.

According to some documents we saw, there is a 4-point plan coming out to weed out any remaining smelters that do not have the necessary approvals.

According to the documents, by May 15th, smelters must do a self-audit.  They are to submit a form to their local government.  By June 30th, the provincial government or the national SASAC group will do the checks. By September 15th, a joint operation of 5 different government departments will do special inspections using the results from smelter self-audits and the provincial checks, as well as reports from social networks and the media.

By October 15th, those same government departments  will provide supervision and guidance to ensure “rectifications’ are in place.

My personal experience in obtaining approval documents for a construction projection China is quite limited (one, indirectly – my experience is based on what my colleague Richard told me at the time when he was building a factory in Tianjin), but I can’t imagine that one can obtain approvals for:

  • Land use permits
  • Environmental impact assessments
  • Energy impact assessment
  • Utility planning
  • Construction permits
  • Project appraisal sign-offs, etc

inside 5 months, especially retrospectively.   From what we can tell, the plan is not to set out to punish and close unauthorized smelters, but to ensure that all China’s smelters are compliant on these fundamental approvals.   However, this document as we have seen it is a follow-on to the announcement on the weekend.

There is one essential difference between the weekend announcement and this document.  On the weekend, three smelters were specifically named.   This document does not name anyone.  On the other hand, it is applicable to every smelter in China.It seems likely that more closures are coming.  Based on the timeframe rolled out in the document, those closures will likely occur around the end of the year.

Internally we debated whether this move has any relationship to the pressures being put on China by WTO actions and by president Trump.   Finally, we think it would be too simplistic to connect those threads, however by putting this process in place it gives Beijing some easy handles to use should it be decided to close capacity to appease Trump or the WTO.  After all,  as we have told our audiences many times, Beijing has limited ability to force its own laws.   Talking the talk in Beijing is much easier than walking the walk.

We expect this document will become public very soon.

We will continue to monitor developments, and our clients and subscribers will be first to hear.

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