Don’t Overestimate Impact on Aluminum Consumption from Environmental Crackdowns, SMM Says

SHANGHAI, Jul. 20 (SMM) – This year has seen frequent environmental crackdowns in aluminum industry. What’s the actual impact?

Environmental protection checks affect mainly downstream processors, and the impact is limited to certain regions and lasts a short period of time, SMM learned. 

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In most cases, it is small processors who lack necessary environmental protection equipment and environmental assessment procedures. Most small processors mainly use aluminum scrap, aluminum compound ingot and non-standard aluminum billet, together with small amounts of primary aluminum ingots as raw materials.   

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By contrast, aside from small amounts of off-cuts from their own production process, medium and large processors usually purchase primary aluminum ingots and aluminum billet as raw materials. 

Small producers’ shutdowns as a result of environmental inspections allowed orders to flow to medium and large ones. Hence, this actually boosted primary aluminum consumption. 

China will control aluminum production during winter heating season. If 30% of aluminum capacity, which SMM sees a good chance to include illegal capacity required to close, and alumina and prebaked anode capacity are slashed as required in “2+26” cities during winter heating season, aluminum prices will see another round of gains in Q4, SMM expects.

The “2+26” cities refer to key regions for environmental protection, namely Beijing, Tianjin, and 26 smaller cities in the Beijing-Tianjin-Hebei region and nearby areas.  

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