SHANGHAI, Feb. 25 (SMM) –
Chinese Aluminum Consumption Needs Time to Recover
Most Chinese aluminum extrusion producers suspended production in early February, and SMM believes domestic aluminum consumption will not recover until March at the earliest.
After this year’s Chinese New Year, aluminum extrusion producers will come back online a few days later than in past years. Besides, production will also be limited by poor orders and post-holiday labor shortages. An SMM survey also found that operating rates at aluminum extrusion producers were only 33% in February.
Aluminum Inventories in China Hit Record High
With growth in aluminum supply in China outpacing that of demand, aluminum inventories in China’s major trade zones are expected to have already hit record high, further increasing the light metal’s oversupply pressure in global markets.
SMM’s survey of warehouses in four Chinese cities shows that aluminum inventories have grown to 1.12 million mt from 750,000 mt in 2012. There is no doubt that aluminum inventories will exceed 1.2 million mt this year.
Several Banks Terminate Aluminum Financing Transactions
Several big banks have recently given up profitable financing transactions, which involve millions mt of primary aluminum stored in warehouses as collaterals.
Credit Suisse Group, owning three million mt of primary aluminum as collaterals, and Deutsche Bank, holding four million mt of primary aluminum as collaterals, are pulling out of these financing transactions.
It was reported that Credit Suisse Group has abandoned all metals financing transactions, but the bank declined to comment on this. Neither did Deutsche Bank make any responses. Barclays Bank announced last Tuesday it will make large-scale adjustments to regain its horror and said it will continue its commodities transactions including metals.
Post-Holiday Alumina Prices Up Overseas, But Stable in Domestic Markets
SMM data indicates that imported alumina prices rose following the Chinese New Year holiday, but domestic alumina was still quoted at RMB 2,500-2,650/mt. FOB prices for Australian alumina rose by USD 3/mt to USD 352/mt immediately after the holiday due to poor weather in Australia’s Queensland state. India’s National Aluminum Company (Nalco) issued a bid on February 16th to sell alumina at USD 357/mt on an FOB basis, slightly higher than current Australian alumina prices. A recent SMM survey found domestic alumina prices were little changed after the holiday, but some Chinese traders raised prices for spot alumina at ports to RMB 2,680-2,730/mt (including tax), up RMB 30/mt from pre-holiday levels. Traders say they were forced to raise prices mainly due to higher CIF prices for Australian alumina.