SMM Summit 2016: Surging Aluminum Prices Bring Chinese Aluminum Producers Back to Life

SHANGHAI, Nov. 17 (SMM) – Chinese aluminum producers registered a sector-wide loss in 2015 after aluminum prices tumbled, and how are they doing so far this year? 

“All aluminum capacities in operation are now running in the black in China based on production costs in October, and profits are decent during the first three quarters of the year,” SMM senior aluminum analyst said at SMM 2016 China Metals Summit (CMS) on Nov. 10-11. 

As of Nov. 15, SHFE aluminum contract prices surged by nearly 26 per cent, with the biggest gain reaching 35 per cent, hitting 14,675 yuan per tonne, the highest of the year and also a new high since September 2014. 

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Domestic aluminum producers succeeded to shake off losses after the big aluminum price. Financial reports released by domestic listed aluminum producers showed their net profits improved during the first three quarters of the year. Of those companies, net profits attributable to shareholders of Yunnan Aluminum and Jiaozuo Wanfang Aluminum soared by 291 per cent and 122 per cent, respectively, on a yearly basis.  

SMM data also show that average profits at domestic aluminum producers were 1,046 yuan per tonne from January to October, with the highest reaching 2,500 yuan. 

“Production costs at domestic aluminum producers are rising with higher raw material prices, but aluminum prices also extend the rising momentum, so domestic aluminum producers are expected to continue running in the black in the coming 1-2 months,” SMM analyst told the attendees at the summit in Shanghai. 

According to SMM data, the average aluminum spot price in China was 12,797 yuan per tonne in September, and full costs at domestic aluminum producers were around 11,500 yuan per tonne, leaving only 1.7 per cent of domestic aluminum producers in losses. In Q4, full costs at domestic aluminum producers are estimated to rise to 13,000 yuan per tonne, after rapid gains in alumina and coal markets, but nearly all on-line aluminum capacities will be operating with profits in China.

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