SHANGHAI, Aug. 5 (SMM) – Despite ongoing capacity expansions and restarts, the chronic overhang of Chinese aluminum supply is likely to ease for the remainder of 2014 due to limited new capacities and cash tightness, Shanghai Metals Market foresees. 

 

Some 1.2 million-tpy of aluminum capacity entered operations January-July and an additional over 2 million-tpy is slated to come on stream later this year, SMM’s survey has found. However, insufficient funds and mild increase in aluminum prices mean that some of the new capacities scheduled for operations may be put off into next year. China Nonferrous Metals Industry Association (CNIA) showed investments in domestic aluminum smelting industry had been slowing since 2011 and even posted negative growth from 2013. The first five months of the year saw a 37% year-on-year slump in investments across the sector. 

 

Besides some smelters decided in May to put one third or some 700,000-tpy of idled capacity back online, but no smelter has finished capacity restarts thus far, SMM learned. This is because cash-starved smelters and similarly strapped local governments are finding it difficult in collecting sufficient funding to support massive capacity restarts. 

 

Moreover, many smelters continue to struggle in loss-making territory even with the preferential power rates, discouraging them from moving ahead aggressively.