Several Departments of the State Council Call for Merger and Reorganization in Aluminum Industry, Xinfa Group Eyes Bauxite in Guizhou

 SHANGHAI, Jan. 30 (SMM) –

Several Departments of the State Council Call for Merger and Reorganization in Aluminum Industry, Overcapacity Remains
Several departments of the State Council – including Ministry of Industry & Information Technology (MIIT), National Development & Reform Commission and Ministry of Finance, issued on January 22 the Guidelines on Stepping up Merger and Reorganization of Enterprises in Key Industries (hereinafter referred to as Guidelines). The Guidelines points out that enterprises in nine industries – auto, steel, cement, shipping, aluminum, rare earth, electronic information, pharmaceutics and agriculture, will face merger and reorganization. Analysts say that no notable improvement has been seen in aluminum industry despite the introduction of numerous policies in recent years to constrain aluminum overcapacity. The issuance of the Guidelines may facilitate merger and reorganization in aluminum industry, but overcapacity pressure remains.          

Aluminum capacity in China reached 26.88 million mt/yr in 2012, with output at 21.96 million mt, indicating severe overcapacity. Consumption has been stable over the past few years, but capacity keeps expanding. With new capacity being built, oversupply pressure will remain heavy in China in 2013. However, the issuance of the Guidelines may help ease overcapacity to some extent.  

Xinfa Group Eyes Bauxite in Guizhou
There are now seven aluminum smelters across Guizhou – including Chalco (Guizhou), Liupanshui Shuangpai Aluminum, and Anshun Huangguoshu Aluminum – representing a combined capacity of 1.34 million mt/yr. Guizhou also has five large alumina producers – including Guizhou Guanglü Aluminum and Chalco Zunyi Aluminum – with a combined capacity of more than 3.4 million mt/yr. The current ratio between aluminum and alumina producers means that alumina production capacity remains in surplus. Nevertheless, China Power Investment and Guizhou Qizheng Chemical are building new alumina facilities, adding another 1.2 million mt/yr in capacity.

 Most of the Xinfa Group’s aluminum projects are in Shandong and Xinjiang, while its alumina plants are in Shandong, Shanxi and Guangxi. Its current alumina capacity is sufficient to meet demand from its aluminum smelters. The Group’s investments in Guizhou thus signal that Xinfa is likely to expand aluminum capacity correspondingly in the future. Its new aluminum hydroxide project, to start construction soon, will pave the way for its alumina production. Xinfa’s ability to expand its aluminum portfolio will be subject to industrial policies and cost control.  

China’s Bauxite Imports Down 11.28% YoY in 2012 on Indonesia’s Export Restrictions
According to China Customs, China imported 3.54 million mt of bauxite in December 2012, down 21.81% YoY. YTD imports through December were 39.61 million mt, down 11.28% YoY.

SMM data indicates China imported 2.25 million mt of bauxite from Indonesia during December 2012, down 38.45% YoY. YTD imports were 27.9 million mt, also down 21.43% YoY.

SMM indicates China’s imports of Indonesian bauxite trended up in 4Q 2012 and the number of importers also gradually increased. Alumina producers, who cut production earlier because of bauxite shortage, are progressively restarting idled capacity. As such, China’s demand for bauxite will rebound in the near term. However, the Indonesian government has sent mixed signals regarding any relaxation of controls on raw ore exports. Therefore, some traders in China are remaining on the sidelines. Chinese enterprises with on intention of establishing plants in Indonesia are now only able to source bauxite from traders in Indonesia.