LME Asia Week 2019: Chinese reforms provide little support for aluminium, lead

HONG KONG, May 7 (SMM) – Across base metals, aluminium and lead have benefitted the least from Chinese reforms, said Ian Roper, general manager of SMM Singapore at LME Asia Week in Hong Kong on Tuesday May 7.

“Supply side reforms have not really restricted Chinese supply of aluminium,” Roper said. Aluminium continues to see excess capacity, with 2.9 million mt of capacity set to come online this year even as production in 2018 shrank for the first time in 20 years, he added. Most of this new capacity was originally slated to come online in 2018 but poor margins deterred smelters from the timeline.

Roper identified the agility of Chinese smelters in responding to low margins. “It’s positive that Chinese smelters are quick to respond when margins are down but struggle to bring production back online when margins improve.”

Bauxite shortages are likely to keep the alumina tight market despite new capacity. “Alumina had an interesting 2018 with plenty of volatility,” Roper said.

China’s clampdown on mining has affected metals and exacerbated shortages of bauxite. This is likely to grow demand for imported supply, Roper said.

For lead, global low inventories are likely to support prices in the near term.

The peak demand of e-bikes in China have taken a toll on lead prices. “The market has reached saturation as the Chinese people upgrade to cars and electric vehicles (EVs), Roper explained. Output of secondary lead has continued to expand, driven by environmental reforms and recycling efforts, even as supplies of primary lead remained tight.