Domestic Aluminum Processing Enterprises to Face New Inspections, SMM Reports

SHANGHAI, Feb. 17 (SMM) – China’s Ministry of Environmental Protection will launch a new round of environmental protection inspections across 18 cities from February 15 to March 15. The inspections will cover Beijing, Tianjin, Hebei (including Shijiazhuang, Langfang, Baoding, Tangshan, Handan, Xingtai, Cangzhou, Heshui), Shanxi (including Taiyuan, Linfen), Shandong (Jinan, Dezhou), and Henan (including Zhengzhou, Hebi, Jiaozuo, and Anyang). 

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What’s the impact on domestic aluminum processing industry from the new round of inspections? 

Domestic aluminum plate/sheet, strip and foil producers involved in the latest inspections mainly locate in Henan's Zhengzhou and Gongyi. Local producers were inspected for many times, and the inspection team imposed fines on those unqualified producers and required them to halt production and upgrade facilities. But, some producers, which have not completed the upgrading and lack of environment permits, arranged production when the inspections were not tight. The latest round of inspections is to target on those producers. After previous inspections, self-disciplined producers have suspended their production units and remain offline. Aluminum demand in the region has been negatively affected by production restrictions at producers, despite sufficient orders. Moreover, the surge in post-holiday aluminum market has also depressed buying interest from local aluminum processing producers, which choose to consume on-hand inventories. Hence, recent outflows from local warehouses were below past years, SMM learns.    

The impact on aluminum extrusion producers should be also watched by latest round of inspections. May extrusion producers in Hebei, Hubei, Guangdong and regions in the Yangtze River were required to halt production for overhaul following previous inspections. The new inspections aim to check if those producers failing to pass the checks keep running against the order. 

"The supply&demand impact across the whole industry is estimated to be small from the new inspections as the impact will be regional," SMM aluminum analyst says. 

In the carbon and aluminum supplementary material markets, Henan market will suffer a big impact. Carbon producers in Zhengzhou and Jiaozuo may cut output by 50 percent, and some aluminum supplementary material producers in the region may reduce output by 50 percent. In Shandong, the impact on the two markets will be small, and so far, local carbon producers receive no output cut notice. Producers in Dezhou and Jinan may be required to cut output in the future, and the cut will be 50% at the most, SMM predicts. 

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