Aluminum Price to Get Lasting Boost from Output Cut Plans? Don’t Be Naive

SHANGHAI, Dec. 14 (SMM) – Chinese aluminum smelters have followed the footsteps of copper and nickel producers by pledging to slash production in a desperate attempt to stem a rout of the light metal. 

Aluminum capacity cuts in China have reached 4.41 million-tpy so far this year, and are expected to expand further to 4.91 million-tpy by the end of 2015, according to the China Non-Ferrous Metals Industry Association (CNIA), which brought 14 large Chinese aluminum smelters together in Yunnan last week to discuss countermeasures to depressed aluminum prices. These smelters said during the meeting that they will not restart lines they have already shut down, and will not put online new capacity for at least a year.  

It remains in doubt as to whether the move, ambitious as it may be, will be put into practice as promised, SMM understands.   

To say the least, the cuts are just a tip of the iceberg in relation to huge aluminum capacity in the country, with a little more than 30 million-tpy still in operation, SMM data showed.   

Anyway, SMM expects the cut news to continue driving price recovery of the light metal for the foreseeable future, although the long-term price outlook still depends on how supply-demand dynamics shape.  

SHFE 1602 aluminum shot up to its highest in almost two months at 10,680 yuan per tonne immediately after cut announcement last Friday, and rose further to 10,705 yuan per tonne as of Monday’s noon.   

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