Henan Aluminum Capacity Elimination to Be Potentially Offset by New Capacity, SMM Warns

SHANGHAI, Jul. 7 (SMM) – The Henan provincial government recently issued a notice to guide three local aluminum smelters to dismantle main facilities, such as electrolytic cells and transformers, for aluminum capacity that has been offline for more than one year before the end of 2018. 

SMM data showed existing aluminum capacity in Henan totals 3.84 million tones, including 12 plants at 8 companies. This includes 2.78 million tonnes of capacity in operation and 1.06 million tonnes of capacity already closed. Among the closed capacity, there are about 570,000 tonnes of long-idled capacity at 5 plants under 4 companies.  

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The latest move by the Henan government is intended to speed up elimination of excess capacity and push for supply side reform. The shutdown will not only help dispose of non-performing fixed assets, but also allow relevant companies to sell aluminum capacity quota so as to generate cash.  

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Yidian Holding Group issued a notice earlier to seek aluminum capacity swap quota for its new 500,000 tonnes of aluminum capacity. Considering that Henan bans cross-province aluminum capacity swap, Yidian Holding Group will probably buy quota from the three companies who will be guided to dismantle long-idled capacity, SMM expects. In that case, aluminum supply in Henan might increase.  

SMM learns that aluminum capacity quota is now traded between 1,500-2,000/tonne and traded prices have the potential to increase.  

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