We issued our May pipeline report to our subscribers this Thursday. China’s total operating capacity increased to 38,239Kt in April.
We all know Xinjiang took strict control on illegal capacity last month. The illegal in-construction projects have been curtailed from Xinjiang Jiarun, East Hope and Qiya. None of them cut their current operating capacity.
Four smelters restarted their capacity in April. The rate of restarts slowed in April compared to March under the tight environmental control and shortage of anode supply.
The anode supply problem is something we have been talking about for many months. There were two smelters postponed their restart plan due to the shortage of anode.
The physical inventory increased to 1226kt by this Thursday. Under the high inventory pressure, the aluminum price showed typical decreasing trend last week. In the meantime, the aluminum processing factories will enter the low season in May. More smelters will consider resuming production very carefully.
If the restarts slowed, why did operating capacity increase in April? Four smelters added capacity in April with total of 240Kt.
China’s supply reform has started covering the aluminum industry. It will not only cover Xinjiang province, but also the whole country. Smelters got really nervous by the rumors of illegal capacity control in Shandong.
We expect there will be no big jump for May’s operating capacity. We expect some smelters will be ordered to reduce output for a few days as a result of the major conference on One Belt One Road in Beijing this month, but it will be a minor interruption to supply.
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