Monthly Archives: March 2011
Have a little pity for Xiong Weiping, President of China Aluminium Company (Chalco.). According to a report in the Moscow Times, Mr Xiong took home only 382,000RMB ($58,000) in 2009, plus a bonus of 191,000RMB.
That’s less than most middle level managers in Aluminium companies around the world.
Of course, it doesn’t include the gifts and the influence that come with the position, as well as the company he keeps. When he has dinner with China’s president Hu Jintao, I’ll bet the size of each man’s salary is not on the agenda.
But it does compare poorly with the salary of Alcoa’s Klaus Kleinfeld, who received $1.3 million in base salary and a further $11.9 million in bonuses.
But the biggest earner was Oleg Deripaska, of UC RUSAL, who
pocketed $70 million in salary, bonuses and share options.
China’s retail price for gasoline is pegged to a formula, which requires an unbroken change in crude oil prices for at least 22 days. But that trigger point has now been reached, and prices at the pump are set to rise strongly.
Reports in the Chinese media are now suggesting that prices will rise to as much as RMB7.50 per litre (about US$1.14 per litre, or $4.30 per gallon). They are currently sitting at the psychologically important mark of RMB7.
While this move will bring some relief for Sinopec, who have recently turned in a relatively poor financial report for the last financial year, it adds another straw to the inflation camel’s back.
There is not much that the government can do about this either. The rise in crude oil prices is essentially a response to the conflict in the Middle East, so the best that Beijing can hope for is an early settlement. But wars rarely achieve a quick ending (which is why the six-day war 40-odd years ago was so remarkable.)
Pushing reserve rate requirements with banks is no solution in this case. The Government has made several adjustments in order to take liquidity out of the market, but those actions are for capital markets and sectors such as real estate.
Fuel price rises will also hurt food and other sectors of the economy, as freight costs will rise. All in all, it is looking increasingly like high inflation is going to be with us for a while.
Reports inside China yesterday indicated that Chalco has sold 14,000t of green coke to Rio Tinto Alcan. No indications as to price or how the deal was executed. We are guessing it is anode grade coke, perhaps being delivered to a Chinese calciner for topping up a CPC order. There has been a shortage of green coke in the market place recently, and there had been talk at TMS that RTA was not fully covered for its 2011 coke requirements.
Chalco is of course a shareholder in RTA, and they are partners in projects such as Simandou in West Africa. But this is the first time we have seen cooperation at an operational level, in China.
If we hear any more, we will post it here.
Editor’s note: I now understand that the coke is destined for Canada.
CNIA and the International Aluminium Institute have now released their figures for China’s aluminium production in February.
Per the rumours that circulated around China recently, the published figure is 1.304 million tonnes. That gives a daily rate of 46,600 tonnes. and sets China on the path towards 18.5 - 19 million tonnes for 2011.
Only trouble is, the figure is almost surely wrong. See what we said about this number in this post.
Shipments of calcined needle coke from Japan to China have been interrupted by the recent earthquake and tsunami, according to reports inside China.
With many of Japans ports closed or running at less than full capacity, March shipments have been delayed a month, though at this stage it is hard to say whether that delay will get worse.
China imported 86,000t of needle coke from Japan last year, according to the Customs data.
Incredible but true. Supermarkets and grocery stores have reported a mass-run on salt here in China. Thanks to an SMS virus and some pretty gullible people, supplies of salt have disappeared in the space of a day. Here at home, my wife and I were barraged with the same SMS message - buy salt now, and beat the coming radiation poisoning.
Yes, as usual fear of the unknown is the engine for this ridiculous situation.
It seems that the theory is that the iodine in salt can act as a deterrent in case nuclear radiation should spread this far west. China’s salt is produced with iodine, to prevent iodine deficiency disorders. Only problem is, the iodine levels are far too low to be of any use in protecting from radiation poisoning. And that doesn’t take into account the fact that the prevailing winds blow in the other direction.
But since this blog is also about aluminium and carbon, we should say a few words about how this run on salt will cause the cost of making alumina to rise. Before reading further, re-check the title of this post…
From a chemical point of view, salt is the raw material in making NaOH (NaCl+H20→NaOH+H2↑+Cl2↑ the reaction condition is electrolysis. And we know that we use NAOH to get alumina from bauxite. (NAOH+Al2O3·H20 →NaAl（OH）4→NaOH+Al（OH）3→Al2O3+H20)
If 1.3 billion people all stock up on salt, it is faintly possible that China’s aluminium industry could be hurt. Emphasis on faintly. But this is China….
(Thanks to Cathy from our office for the Chemistry part.)
Word inside the CPC market is that the current Nalco tender has been killed off.
No official word from Nalco on the subject, or on the reasons why, but it comes hot on the heels of their last tender, when the local calciners offered prices up around $600 per tonne.
That is, all but one of them offered a high price. One tiny producer offered a much lower price, but couldn’t supply enough material to cover the tender. That left Nalco going back to the big boys. But the big producers refused Nalco’s demand to match the low price, maintaining their seemingly united stand at $600+.
Whether Nalco is still smarting from that experience, or got frightened by reports that the price is still very high, or simply didn’t get conforming bids, is hard to tell.
The problem that Nalco faces however, is that they still need the CPC. That’s the problem with running a critical item on a tender basis. Most smelters wouldn’t dream of living hand-to-mouth on CPC. But Nalco is a Government company, and must follow the rules, though in this case, it seems likely to hurt them. CPC prices are still heading north, so delaying the inevitable only means they will pay more later.
If we hear any more, we will let you know. If you hear any more, be sure to post a comment.
Our blog site suffered a temporary technical problem about 24 hours ago, causing readers (and us) to get nothing but a blank screen.
But the problem has been fixed now, and we are back up and running.
Our apologies for any inconvenience.
Early reports are emerging that the primary aluminium production figure for February will be posted as 1.305 million tonnes.
If that is true, then it can’t be true.
Let me explain. If CNIA does publish that number - they aren’t due to publish for another week - then it means that February’s production ran at 46,600 tonnes per day, or an annual rate of 17 million tonnes. But it also means that the run rate jumped by 14% in the space of a month, and a month in which we had Chinese New Year holidays. Of course, smelters run steady-state regardless whether it’s a public holiday or not, but public holidays make it hard for the operations guys to crank up additional pots.
But there is another clue as to why we should not rush to judgement about the February result.
Look at the results for February for the previous 4 years. (Daily run rate kilo tonnes)
Year Jan Feb March
2007 31.3 32.8 32.2
2008 34.2 34.6 33.7
2009 28.9 31.0 29.1
2010 41.7 46.5 45.0
2011 40.8 46.6 ?
In all cases, the result was a jump over January, with a fall back in March. Although it is circumstantial evidence, we believe this effect is due to under-reporting in the previous fourth quarters. it seems like there is a clean-out of residue production figures, and rather than adjust historical numbers, they are simply fed into the current month. We don’t understand why the catch-up doesn’t occur in January, but the January numbers are always delayed, and perhaps they don’t want to make the adjustment too obvious.
We also know that some smelters deliberately under-reported their production in Q4 2010, not wanting to draw attention to the fact that they were operating in spite of the energy intensity restrictions of last year. Either way, it does seem that someone is fiddling with the production figures.
All we can say is, watch this space. We will report on the published production number when it comes out, and the March figures as well.
But if February is running at 17 million tonnes on an annual basis, then our prediction is looking good for the year to come in at 18.5 - 19 million. There are still several smelters cranking up new pots, for instance the Chalco 500kA plant that we mentioned a few days ago.
The talk on the street is that there will be not one but two additional smelter expansions, to add to the plethora of construction activity that is already going on.
Shenhuo Coal, one of China’s largest coal producers, and already an aluminium company with assets in Henan province, has recently commenced construction of an integrated aluminium complex in Xinjiang province. The project will be built in phases, with the first phase being in operation as early as the start of 2012. The plant is being designed for an eventual size of 1.6 million tonnes.
Meantime, East Hope will build an 800,000t smelter, also in Xinjiang province. This plant will use 350kA technology, and will commence operations in April 2012.
Both plants will have carbon plants, though the Shenhuo carbon plant will likely not be big enough to supply all needs.
Perhaps that is why Sunstone, one of China’s larger exporters of anodes, is looking to build a merchant carbon plant in far west China, as a support supply to the slew of smelters that are being built out there.
News about these two new smelter projects is still only street talk, but they already represent more than 2 million tonnes of new capacity, with as much as a third of that capacity coming into the market by early next year. And this news comes just a couple of weeks after we did our sweep of all the new projects for our Forecast Study for Metal Bulletin Research.
The good thing about street talk in China is, it’s more reliable than the official data.
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