SHANGHAI, Nov 25 (SMM) – China’s production of primary aluminium is expected to grow much faster than consumption in 2020.
At the China Nonferrous Metals Industry Annual Meeting 2019 and the 2020 SMM Price Forecasts Launch in Shanghai last weekend, SMM senior aluminium analyst Liang Xuan said that stronger supply pressure is weighing on aluminium prices in the coming year.
"Output of primary aluminium in China is estimated to increase 2.5% to 36.44 million mt next year, after shrinking 1.51% this year. Aluminium consumption in China will also pick up, albeit at a much slower pace of 0.3% to 36.19 million mt, from a decline of 1.48% in 2019," Liang said.
With 1.99 million mt coming online in the first 10 months of the year, there was 40.69 million mt on an annualised basis of primary aluminium capacity built in China as of the end of October, and 35.1 million mt was in operation.
"Compared to primary aluminium, alumina capacity increase at much faster rate, with more than 10 million mt of projects in the pipeline in China," Liang added. "Alumina capacity in China is likely to increase by 6.2 million mt in 2020."
The recovery of Hydro’s Alunorte refinery in Brazil and the commissioning of Emirates Global Aluminium (EGA)’s Shaheen's plant in the United Arab Emirates, meanwhile, send the overseas market in a sharper oversupply of alumina, opening the arbitrage window for Chinese importers and boosting supply pressure domestically.
Alumina capacity expansion in Indonesia and the recovery of China’s Jiuquan Iron & Steel’s refinery in Jamaica will be the major drivers of alumina production growth outside of China next year.
Prices of alumina across Chinese market have declined 14% this year, with prices of prebaked anode slipping 11.5%. Prices of coal, meanwhile, pulled back from earlier highs to levels seen at the start of the year. This helped to recover profit margins across primary aluminium producers.
Alumina capacity expansion in China and technical upgrading are set to maintain imports of bauxite at high levels in 2020, but the growth will be slower.