China April aluminium output and May forecast

According to SMM statistics, China's aluminium output was 3.515 million mt in April (30 days), up 4.98% YoY. In April, some aluminum smelters in Yunnan were still proceeding with production resumption, driving domestic aluminum industry's daily average output to around 117,200 mt. The share of aluminium liquid output rose by 1.4% MoM and 2% YoY to about 75.36%. According to SMM aluminium liquid ratio data, the domestic aluminium ingot volume in April was down by 2.77% YoY to around 865,900 mt.

Changes in production capacity: As of the end of April, the existing aluminium capacity was about 45.19 million mt, the operating aluminium capacity was around 42.62 million mt, and the operating rate grew by 4.31% YoY to 94.31%. The increase in operating capacity mainly came from the gradual production resumption in Yunnan. The improvement of electricity supply in Yunnan Province and high aluminum prices stimulated the second round of production resumption at local smelters. As of May 9, Yunnan's annual operating capacity was about 5.15 million mt, up about 660,000 mt from early March and up 480,000 mt from early April. In addition, one smelter in Xinjiang and one in Guangxi who shut down due to maintenance resumed production, boosting domestic aluminum operating capacity.

Output forecast: In May, the domestic aluminum operating capacity is expected to continue to rise, mainly as power supply in Yunnan Province recovered and local capacity steadily resumed. We still need to pay attention to the progress of resumption of the remaining production capacities in Yunnan. SMM expects additional 350,000 mt/year of capacity in Yunnan will reach full production in May, while other regions may change little. SMM predicts that domestic aluminum operating capacity may rise by 350,000 mt to 42.97 million mt at the end of May. The aluminum production capacity in May (31 days) is expected to be around 3.64 million mt. In addition, some loss-making enterprises were forced to halt their production as processing fees at aluminum billet factories in Guangxi remained low at the end of April. The domestic aluminum ingot volume may increase in May, and the share of aluminium liquid output may pull back to 74.5%. We need to pay attention to production resumption in Yunnan and downstream operating rate such as aluminum billets industry.