[Al] SMM Review and Forecast of China Aluminum Industry 2009

SHANGHAI, Oct. 23 (SMM) - SMM review and forecast of China aluminum industry in 2009 based on SMM surveys of nearly 130 domestic aluminum producers:

    1) Aluminum Output

    Market players believed China's aluminum output in 2009would experience negative growth in late 2008, but China's aluminum output will maintain a growth rate of 0.9% in 2009 based on SMM statistics. In the mean time, the proportion of aluminum output at CHALCO in total aluminum output dropped, with the proportion estimated at 22.2% in 2009, down 2% from 2008 levels. Only central China and north China reported slight declines in aluminum output, while aluminum output in other regions maintained growth.

    2) Aluminum Capacity

    An excess of 16 million mt/yr aluminum capacity will be in operation by the end of September, and total aluminum capacity of 17.35 million mt/yr will be in operation by the end of 2009, up 5.83 million mt/yr from end-2008 levels, and up 50.7% YoY; in the mean time, operating rates at China's aluminum producers have soared to 88.2% from 62.3%, and operating rates at aluminum producers in central China, southwest, south China and northeast reported largest growth rate, and the four areas also experienced largest production cuts in late 2008.

    Take Henan province in central China for instance, although relatively more production cuts and suspensions occurred at aluminum producers in Henan, the large existing aluminum capacity and large amount of restarts helped increase operating rates in local aluminum industry to nearly 90% from 55.7%. In addition, a 1.05 million mt/yr of capacity will come online in 2010.

    Northwest area will also likely report significant growth in aluminum capacity in 2010, as more new projects are under construction in this area in view of local energy advantage.

    3) New Aluminum Capacity

    New aluminum capacity increased by nearly 5% on a monthly basis during 2Q and 3Q, which means approximately 600-700kt/yr of aluminum capacity comes online every month. SMM predicts the growth rate of new aluminum capacity will slow markedly from October, and monthly new aluminum capacity in 4Q will fall to about 300kt/yr in view of relatively high operating rates at domestic aluminum producers and colder weather when the winter is drawing near.

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