According to NBS, March saw 1.57 million tonnes of primary metal produced, which makes for a daily run rate of 50,580 tonnes. That’s a drop of 6% from February.
We have often said in here and in our reports to our clients that it is dangerous to believe the official numbers in China. But it was gratifying to see that our prediction that March would see a drop came true. Our prediction was in stark contrast to some analysts. One particular major bank poured scorn on China for a ramped increase in production in February, even going so far as to suggest that China’s producers were somehow working together to subvert the efforts by western aluminium companies to reduce metal supply.
For the last 5 years, March’s production number has been below the February number. Not only that, the February number has often been a very large jump over January. But most analysts didn’t bother to check. The only other commentator that I saw who picked this was Andy Home at Reuters.
China’s official data comes from two sources. The NBS publishes around the 10th working day of the month (we had 3 public holidays last week). They collect and report on thousands of products from all over the country, so it is hard to believe they can put much effort into cleansing the data before publishing.
The other source is China Nonferrous Metals Industry Association. They are also an arm of the Government. Their data comes out in the third week of most months, but they have their own problems. As a Government instrument, they aren’t allowed to report on output from smelters that don’t have Beijing approval to exist. That accounts for about 2 million tonnes of metal.
They have a daughter company called Antaike, which publishes a monthly report on the China aluminium industry. They feel less constrained than their parent, so they at least report on unapproved smelters, but the Chinese and English versions of their reports sometimes carry different data.
This is why it is so important to check that the analyst you are using isn’t just taking Chinese data on face value. So many analysts, so little analysis.
Only AZ China has the inside story on what is really happening at a smelter level. We will be sharing more about the China aluminium story with our clients, especially in our upcoming new report “China’s Cash Cost Curve”, and at our upcoming conference. For more information about our Cash Cost Curve Report or about the conference, contact us at AZ China. The conference website is here.