Henan Aluminum Plate/Sheet, Strip and Foil Producers Halt Production on Environmental Factor, Why Aluminum Premiums Stay Firm? SMM Reports

SHANGHAI, Dec. 22 (SMM) – Henan’s provincial government held an emergency response meeting on December’s 19 night after some local industrial enterprises took no measures to reduce pollution emissions, despite red alert for heavy pollution for several days in many cities of the province. 

According to the emergency meeting, Henan’s government will carry out six measures during its 72-hour centralized, uniform action against air pollution from December 20-22. The six measures include pushing forward execution and implementation of measures on production cuts or halts at enterprises, pushing forward execution and implementation of measures on production halts at construction sites, punishing vehicles driving against the regulations, dealing with pollutant emissions at enterprises, disclosing enterprises which violates emission standards, and disposing zombie enterprises.

Gongyi is the largest producing region of aluminum plate/sheet, strip and foil in China, with output accounting for around 18% of China’s total. SMM survey finds that local producers of this kind were allowed to produce as long as they have environmental permit, but the round of environmental protection inspections is stricter. Some producers, despite having environmental license, have been required to shut down if their emissions do not reach standards and they do not upgrade their energy equipment (switching from coal-fired to natural gas-fired). Casting and hot-rolling lines at some producers have been suspended, but cold-rolled units remain online. Production at Mingtai Aluminum is normal as the company is equipped with environment-friendly facilities and meets emission standards. 

Spot transactions in the local market have been negatively affected by 3 or 4-day production halts at downstream producers after the latest round of environmental drive. However, SMM learns that supply of aluminum ingot remains tight in Gongyi due to supply controls by large aluminum producers and depressed transportation from Xinjiang. Cargo-holders in the region held back goods, and this supported local spot aluminum prices, which turned into spot premiums at around RMB 20/mt from large spot discounts, briefly reaching more than RMB 100/mt one week ago.