China Aluminium Output Increase in June Due to the Production Resumption and the New Capacity

SHANGHAI, July 11 (SMM) - According to SMM data, China produced 3.361 million mt of aluminium in June (30 calendar days), up 4.48% on the year. The daily output stood at 112,000 mt, up 1,231 on the month and 4,790 mt on the year. The output totalled 19.559 million mt from January to June 2022, an increase of 0.47% on the year. The domestic aluminium supply in June continued to increase. The production resumption and the new capacity in Guangxi, Gansu, Yunnan and other regions totalled around 450,000 mt, contributing the major increase. As of early July, Chinese aluminium production capacity reached 41.05 million mt, the effective built-up capacity scale was 44.57 million mt, and the operating rates stood at 92.1%. During the month, the proportion of aluminium liquid in Xinjiang and Inner Mongolia adjusted. According to SMM, the domestic proportion of aluminium liquid increased by 0.9% on the month to 66.5% in June.   

In July, Gansu Liancheng, Guangxi Jili Baikuang, Guangxi Investment Group Yinhai, etc. resume the production steadily. In addition, the new capacity of Gansu Zhongrui and Guangyuan Zhongfu have also been put into production as planned. Therefore, the domestic aluminium operating capacity will continue to rise. SMM expects that the domestic ealuminium production capacity will reach 41.4 million mt by the end of July, and the domestic aluminium output in July is expected to reach around 3.48 million mt, a year-on-year increase of 6.2%. Recently, the aluminium prices fall significantly, and 25% of the domestic capacity is in a state of loss. The market should be alert to the follow up impact of the continuous decline in aluminium prices on the profits of the supply side. On the demand side, the new orders of construction extrusions and aluminium sheet/plate declined amid the off-season in July. Therefore, the operating rates declined and the price spread between domestic and overseas aluminium prices narrowed. The domestic aluminium export profits declined, hence the aluminium export volume will also decline on the month. In addition, as the price spread narrowed, the import loss of aluminium ingots in June has narrowed to less than 100 yuan. In this case, the inflow of some low-priced imported goods will also have a negative impact on the domestic aluminium ingot market. The domestic aluminium social inventory is unlikely to decline in July. SMM expects that the domestic aluminium inventory will be around 780,000 mt by the end of July.