15 aluminum companies meet in Shandong

On December 13th, fifteen companies gathered in Shandong Province to discuss the current aluminum industry status and measures to develop the industry. Representatives of the participating companies have expressed hope to further strengthen communication and cooperation, and jointly safeguard the market rules, and “guide market participants to correctly understand the price, supply and demand market situation, to protect the healthy development of the industry”.

The meeting included representatives from Shandong Weiqiao, Chalco, SPIC, JISCO, Yunnan aluminum and East Hope.

The aluminum price has shown modest growth in December. The aluminum price started correcting as we went deep into the low season. Some aluminum smelters had reported losses when the price dropped to the average cash cost level. After talking with the smelters and traders, we understand they hold low sentiment for the aluminum price after the Chinese New Year holidays.

The 15 big smelters’ meeting made us recall the 14 big smelters cutting capacity meeting at the end of 2015. Since that meeting, the aluminum price rebounded 30% in 2016.

During the middle of the year when the aluminum price showed a declining trend in June, the 6 big smelters gathered in Beijing to talk about commercial stockpiling to save the price. They jointly invested in a company called Zhongheng Xieli Investment Co. Ltd. We did not really see much news or actions since then.

With the continued increasing capacity from restarts and new projects, aluminum supply grows faster than demand. Although the tight transportation, high raw material cost and speculative activity supported the metal price at the moment, the aluminum price faces downturn risks.

Based on the local news, the names of these 15 smelters have not been fully published, but it mentioned the 15 attendants occupy around 70% of the total China capacity.

There was no mention of which measures they would take to save the market. We are sure the restarted and new project capacity will not be closed. It means the large volume of metal will flow into the market anyway. How will this meeting save the price? What market rules have they concluded? Will the rest 30% China capacity follow their rules or not?

Editor’s note: It is also rather remarkable that these companies think nothing of the exercise of market power, nor do they care about any accusation of cartel-like behavior. It is also worth noting that the CNIA was not mentioned. The industry heavyweights are taking action for themselves.

AZ China has been warning its clients for some time that the price is due for a major correction in the new year.