Chinese Aluminum Smelters Register Decent Profits in 2016 on Surging Prices, SMM Reports

SHANGHAI, Mar. 3 (SMM) – With aluminum prices bouncing back, Chinese aluminum smelters reported decent profits in 2016. According to financial reports by major listed aluminum companies, net profits at the five major producers surged in 2016 on a yearly basis, and Yunnan Aluminum topped the list, with details in table below.

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Source: financial reports

In 2016, production costs at domestic aluminum smelters grew with rising prices of alumina, coke and transportation fees. But, surging aluminum prices helped improve their profits.

According to SMM data, the average profit at domestic aluminum producers was 1,000 yuan per tonne in 2016, with the peak level of around 2,500 yuan per tonne. At present, the average profit is about 450 yuan per tonne. 

China's aluminum smelting industry climate index rose from 19.71 in January 2016 to 47.16 in January 2017, according to China Nonferrous Metals Industry Association, a sign of big improvement in business profits in the whole industry.

In 2016, profits at domestic aluminum smelting industry amounted to 22.6 billion yuan, and the proportion of smelters in losses fell to 18.5 percent, down 11.2 percentage points on a yearly basis. The average aluminum spot price in China’s domestic market was 12,797 yuan per tonne in September 2016, the best time of price in the year, while full costs at domestic aluminum producers were around 11,500 yuan per tonne, and at that time, the proportion in losses only accounted for 1.7%.

The increase in profits grew market investment enthusiasm. The fixed-asset investment in domestic aluminum smelting industry, which dropped for three years in a row from 2013 to 2015, rallied finally in 2016, with YTD completed investment reaching 57.3 billion yuan, up 2.81% YoY.

Domestic aluminum smelters also turned active in restarting offline capacities or expanding new capacities. SMM data show the number of capacities being commissioned among all restarted or newly-increased ones reached 3.95 million tonnes in 2016, and the number is expected to grow further in 2017.

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