Aluminium output to the tune of 1.8mn mt is likely to be hampered in China amid power cuts and disasters, according to local media reports.
From early July, China faced power outages in many parts of the country due to coal shortages and resulting electric supply cuts. Heavy rainfall also impacted 900,000mt of aluminium output in Yunnan. The government’s emphasis on carbon neutrality is also likely to keep aluminium production slower in the latter half of the year. The report suggests aluminium will continue to fluctuate on Shanghai Metal Exchange, with an upward channel line for a short time.
In Henan, the aluminium sheet, strip, and foil industries have an operating capacity of about 4.8mn mt. Power cuts and shutdowns followed by heavy rains impacted 30pc of production. Heavy rains have affected Zhengzhou, Gongyi, and other places where aluminium processing units are densely populated. The transportation of Zhengzhou Railway Bureau has been paralyzed, affecting the transportation of aluminium products. The local aluminium casting volume could increase this week, and the inventory at factories will deplete.
Flood-related mishaps led to shutdowns, resulting in a decline of 415,000mt in production, around 21pc of Henan’s operating capacity and 1pc of the national operating capacity. On July 20, in Zhengzhou city, the water accumulation from the flooded Yinghe river caused an explosion at Denfeng Dengdian Aluminium Alloy company, impacting 40,000mt of production capacity. On July 21, the gushing river Jiaozuo near Jiaozuo Wangang Aluminium Company led to a stoppage of production.
In recent years, the electrolytic aluminium production capacity from Henan was transferred to other provinces. As of July 2021, Henan has currently six primary aluminium producers, including Hengkang in Shahxian County, with a production capacity of 2.13mn mt and an operating capacity of 1.96mn mt, accounting for 5pc of the total in the country. Yidan Group has an operating capacity of 60,000mt, Wanji Aluminium has a capacity of 580,000mt, Jiazuo Wanfang having a 370,000mt capacity, and Zhongfu Industry having a 250,000mt and Dengdian Group having 40,000 capacity.
Dumping and Storage Rules Updated
The State Reserve Bureau issued the second batch of dumping and storage rules. The volume of aluminium ingots released was 90,000mt from 50,000mt. The volume was still lower than the 100,000-200,000mt level rumoured to be in the market. According to reports, State Reserve Bureau has more than the 800,000mt retained after 2008. The bureau recently added that it has confidence and ability to cool off-market, considering this aluminium supply-demand will be in proportion despite regulation on dumping reserves.