What’s Impact on Chinese Aluminum Producers from New Environmental Drive? SMM Reports

SHANGHAI, Dec. 12 (SMM) – The second round of 7 environmental protection inspection teams arrived in seven regions from November 24 to 30 to supervise environmental protection work, including Beijing, Shanghai, Guangdong, Hubei, Chongqing, Shaanxi and Gansu.

What’s impact on producers in the aluminum industry from the inspections? SMM

Will New Environmental Protection Inspections Trigger Massive Cuts in China Metals Producers? SMM Reports

Aluminum and alumina producers

Chinese government has taken a tough stance in environmental protection inspections since the beginning of 2016. Domestic aluminum and alumina producers are mostly large-size producers equipped with environmental protection facilities, and so they have suffered little impact from the inspections, except one aluminum producer in central China. The producer was requested to shut down its captive power plant and to source electricity from power plant directly in the previous round of inspections.  

SMM survey finds that one alumina producer in Chongqing has been requested to cut alumina capacity by 350,000 tonnes for environmental upgrading after excessive discharge of pollutants. The producer is now running at 350,000-tonne alumina capacities, with output all for its aluminum production use. So far, it is unknown for offline capacities to go back to normal.  

Aluminum processing producers 

Domestic aluminum processing producers are suffering a big impact from environmental protection inspections, SMM survey finds. The stricter inspections led to closures of aluminum billet producers in Inn Mongolia’s Huolinhe, switching from coal to natural gas at copper plate/strip, sheet and foil producers in Gongyi, and production halts at small and medium coal-fired aluminum extrusion producers in Hebei.  

In recent days, aluminum processing producers have been hit by the inspections in Foshan, Guangdong. This is not the first inspections on local producers in the region, and the local government has started inspections on aluminum extrusion producers since 2014. In accordance with Air Pollution Prevention and Control Action Plan on Aluminum Extrusion Producers in Foshan in 2014, the local government closed 37 producers in Nanhai District, and completed rectification work on 94 producers. 

Since 2016, environmental protection inspection teams sent by China’s central government arrived in the region, and the local government stepped up efforts to push for the inspections. Foshan’s government this April introduced the Plan for Promoting Air Pollution Prevention and Control Action on Aluminum Extrusion Producers in 2016-2017. According to the plan, a new round of inspections would be carried on all 157 aluminum extrusion producers in the region, and all producers would be requested to complete clean energy upgrading before late June 2017, or they would be shut down. Currently, 51 producers in Nanhai have completed the upgrading, and another 75 producers will finish the overhaul by late October. 

Some small and medium-size producers have closed their smelting furnaces for severe energy pollutions, shifting raw material from aluminum ingot to aluminum billet. Processing fees for aluminum billet, which has already been tight, skyrocketed in the region after the shift, and trading for aluminum ingot was sluggish as a result, reversing the gap between Guangdong and Shanghai.  

SMM believes that the impact from environmental protection inspections will be a typical regional one, and will be limited on the overall industrial chain. Hence, the impact on price will be small in all price influential factors. Attention should be paid more to whether or not producers violating the rules will upgrade their units to meet requirements, so as to give more consideration to environment and future generations than costs and profits.  

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