SMM Forecast for Operating Aluminium Capacity in China in Different Scenarios of Output Cuts in Yunnan

SHANGHAI, Sep 23 (SMM) - Currently, aluminium smelters in both China and overseas are curtailing their production due to the domestic power shortages and stubbornly high energy costs overseas.   

China: Smelters in Sichuan started to reduce their production from July, and were virtually shut down entirely in August due to power rationing. The power supply was gradually restored at the end of August and the beginning of September, allowing the electrolytic cells to be restarted one after another. However, it will take nearly two months for the local production to be fully recovered. Entering September, smelters in Yunnan were also subject to output reduction due to power shortages. Roughly 10% of aluminium production in the province has already been cut, and the figure could potentially expand to 20-30% in the future.  

According to SMM survey, smelters will continue to restart idled capacity while putting new capacity into operation in the fourth quarter. The new capacity of Guizhou Yuanhao, Guizhou Denggao, Guangyuan Zhongfu, and Inner Mongolia Baiyinhua will total 680,000 mt, of which 460,000 mt is estimated to be released this year. 

However, the scale of output cuts in Yunnan is still uncertain. Assuming a 10% production reduction in Yunnan, the operating aluminium capacity in China will total 40.82 million mt in September. If the reduction in Yunnan expands to 20%, the domestic operating capacity would decline to 40.62 million mt. Based on the latest survey, the likelihood of a 30% reduction in Yunnan in September is small. The followings are SMM’s estimates of the domestic operating aluminium capacity in the fourth quarter in different scenarios of output cuts in Yunnan (10%, 20%, 30%).

Overseas: The aluminium capacity reduction in Europe has amounted to 1.54 million mt so far this year, and additional 150,000 mt is likely to be cut in the future.