High costs, cash flow issues cut aluminium capacity

SHANGHAI, Oct 24 (SMM) – High costs, cash flow issues,and a pessimistic outlook on consumption and prices drove 13 domestic aluminium producers to cut production as of Wednesday October 24, an SMM survey found. This will affect annual capacity by over 1.65 million mt, with some 750,000 mt to be cut from September to November. Actual cutbacks are likely to expand further, SMM believes.  

Cuts are likely to bolster prices but unlikely to cause a shortage of supplies in the short run as inventories of aluminium ingot currently remain above 1.5 million mt. Moreover, some new capacity entered production in Inner Mongolia, Guangxi, and Yunnan provinces.

While costs at aluminium plants averaged 15,000 yuan/mt in September, average spot price of the metal stood at 14,541 yuan/mt in the same period. This resulted in a loss of some 500 yuan/mt, SMM research found.