Will Supply Side Reform Be Game Changer for Aluminum Prices? SMM Reports

SHANGHAI, April 24 (SMM) – Three aluminum smelters in Xinjiang, the center of China’s aluminum industry, were affected by the country’s ongoing supply side reform last week, SMM learned.

Several employees at Xinjiang Qiya Aluminum were transferred by local government on April 17 and did not come back to work until April 20. The company’s No.1 and No.2 production lines, with total capacity at 800,000 tonnes, are still running. It has completed construction of No.3 production line, whose capacity is 400,000 tonnes, including 380,000 tonnes of capacity swap with Sichuan Qiya Aluminum and 20,000 tonne of illegal capacity. The company is expected to put the 380,000 tonnes of capacity online later this year. Construction of No.4 and No.5 production lines, for which electrolytic cell digging and land leveling were just finished, has been suspended.         

Xinjiang Jiarun Resources closed three electrolytic cells last Wednesday and closed another ten the next day, involving 20,000 tonnes of capacity.

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Xinjiang East Hope Aluminum, whose capacity in operation is 1.6 million tonnes, is under normal production and has no plans to halt production. However, it has suspended project under construction.  

Despite the ongoing supply side reform, the impact on aluminum prices will be limited in the short term, SMM pointed out, since many local governments have not released detailed regulations for capacity cuts.  

The government of Xinjiang has adopted tougher than ever stance over aluminum projects that violate rules. Xinjiang Qiya Aluminum, Xinjiang Jiarun Resources and Xinjiang East Hope Aluminum are trying to turn illegal capacity into legal capacity through legal means so as to minimize the impact on their operations. 

While the central government vows to crack down on aluminum capacity that violates rules, it does not want to see too much disturbance on industry, business and prices. Instead, the central government intends to make expansions in aluminum industry meet regulations, more controllable and orderly. 
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