Despite the scare-mongering of some analysts, the aluminium production numbers for September show a different picture than is widely reported.
September came in at 1.308 million tonnes, or 43,630 tonnes per day. Here at AZ China, we actually expected it to be slightly lower. But with the metal price rising, smelters are now looking to grab some black ink, after months of the red variety.
The Chinese Government’s actions to reduce energy intensity have caused some smelters to reduce production, but the bigger result has been in the headlines around the world. Analysts and commentators, sitting outside China, have predicted everything except the end of the world as we know it.
The truth is somewhat different to what is being said outside China. Production is still on track to close out at 16.0 – 16.5 million tonnes. True, that is 1 million tonnes lower than we predicted at the start of the year. But that is the extent of the energy cutbacks.
We expect up to an additional 300,000 tonnes of reductions in the remaining 3 months. We know it is this much, because we have spoken to the affected smelters. But we also know that others are bringing capacity back into the market to make the most of the price. Shanghai was at RMB16,400 on Friday. While this is still RMB600 lower than the break-even point for most smelters, it represents a good deal, compared to what the price will be in the new year. That’s when all that constrained capacity will come back to the market, along with up to 7 million tonnes of new capacity.
Want more information about what is really happening, as opposed to what some analysts are claiming? Contact us at AZ China.