Although China's aluminum production is projected to grow 12 percent, this is just too fast amid surging international prices, causing China's power planning and regulatory National Development and Reform Commission (NDRC) to consider curbing the burgeoning industry, according to research released Friday by Industrial Info Resources.
The commission is taking note of a market where aluminum prices averaged over $2,700 per ton in the fourth quarter of 2006 compared to a price of $2,100 per ton at the beginning of the 2006.
In the Chinese domestic market the aluminum price increase to the equivalent (at a yuan conversion of CNY7.82: $1) of $2,685 to $2,813 per ton from $2,493 at the beginning of 2006.
Alumina prices slumped to the equivalent of $306 per ton on the domestic market from $767 in the first half of 2006, the NDRC reported.
The fall in the feedstock price is encouraging more investment in production capacity as the profit margins increase. It is estimated that China’s alumina output may have topped 15 million tons in 2006 which represents and increase of 805 over 2005, the report said.
In November, China lowered the import tariff on alumina from 5.5 percent to 3 percent which has marginally lowered the import cost of the feedstock. Most of the Chinese alumina producers are on a small scale, use outdated production techniques and have a production cost that is over 50 percent higher than the global average.
The research shows that on the London Metal Exchange aluminum hit a record $3,275 per ton in May. Global supply growth is expected to be maintained at a rate of 6.5 percent in 2007 with China driving the margins with a 12 percent growth in production and a 14 percent growth in demand. The global aluminum surplus is expected to be at around 200,000 tons during the year.
At the same time aluminum output is expected to have risen 17.8 percent in 2006 to 9.2 million tons and will increase a further 14 percent to 10.5 million tons in 2007. A 5 percent levy was put onto aluminum exports in January 2006 in an attempt to conserve domestic resources and this was raised to 15 percent in November, according to Industrial Info Resources' report.
The World Bureau of Metal Statistics show that the world market carried a 328,000 ton surplus of aluminum from January 2006 to October 2006. Demand rose to 28.2 million tons, an increase of 1.6 million tons on the 2005 figure. Global production was up 5.2 percent for the same period reaching an all time high of 2.91 million tons for the month of August.