Page 9 - pd248 April17 mag-web

OPINION

Heat on in aluminum market

The political heat is rising in the alu- lieve the figures supplied to the IAI by is far more extensive than the winter pol-
minum market, with a trio of indus- China’s Nonferrous Metals Industry As- lution measures and it is already affect-

try bodies calling on the G20 to address sociation (CNIA). ing production rates.

global market imbalances resulting from It seems highly unlikely that such a Environmental inspection teams were

China’s burgeoning output. huge amount of capacity simply went of- in Henan province last month and at

“China’s state-sponsored support is fline last month. least one operator, Linfeng Aluminum

contributing to an unsustainable struc- The largest monthly swing in produc- and Power, closed some capacity as a

tural overcapacity that will impact growth tion in the rest of the world over the past result, according to specialist Chinese

and contribute to heightened instability 10 years was a drop of 584,000t in Janu- aluminum consultancy AZ China.

until it is addressed.” ary 2012, a period of falling prices and Capacity closures across the metals

So wrote the heads of the US Alu- multiple capacity closures. production sector are now increasingly

minum Association, its cross-Atlantic Seasoned aluminum hands have happening pre-emptively ahead of in-

peer European Aluminum and the Alu- grown accustomed to this sort of volatil- spections.

minum Association of Canada in a March ity in Chinese production figures, particu- Moreover, environmental inspectors

15 open letter to the Group of 20 leading larly around the end of both calendar and are returning at regular intervals to check

economies. lunar years, as well as the occasional re- on progress. Shandong province will re-

What they want is the sort of global fo- visions to historic production figures. ceive its fourth environmental check next

rum created to discuss steel overcapac- CNIA shocked the market at the start month, AZ China says.

ity at last year’s G20 summit. of 2016 when it added more than 4mt to Beijing is committed to sending in-

“The charges against China’s leviathan the production ledger over the 2011-14 spection teams to every province over
aluminum sector are largely the same period. the course of this year, including key alu-

as those against its equally minum production hubs such as

huge steel industry. China’s dominance of global Xinjiang.
“Both the massive in- production has left the Chinese policymakers’ search

crease in production and the aluminum market highly vulnerable for “blue skies” has injected a new
excess capacity have had level of uncertainty in the world’s
a downward effect on the to shifts in the country’s policy. largest supplier of aluminum.

prices, generating significant And that means a previously un-
economic and employment known degree of uncertainty in a

losses for our respective pro- global aluminum supply chain that

ducers and economies,” the three asso- It has just sprung another little sur- has historically not been prone to the sort

ciations said. prise; this time deducting 154,000t from of disruptions that plague other industrial

As with steel, trade tensions are ris- 2015. metals, such as copper.

ing with the US taking the lead. It has The official monthly figures, in other All this at a time when aluminum us-

launched a broad complaint about Chi- words, should carry a strong health age is growing fast as the metal takes an

nese aluminum subsidies with the World warning. ever-growing materials share in key sec-

Trade Organisation, while the Aluminum Production seems to be trending high- tors such as transport.

Association has filed a petition seeking er. Taking the cumulative net change Its success has in large part been

anti-dumping duties on aluminum foil. over the past four reported months predicated on a global tendency to over-

All of which is somewhat ironic. (November 2016 to February 2017), na- produce, particularly in China, and the

The price of aluminum traded on tional run rates have increased by about resulting relative low level of pricing vola-

the LME is up 14% this year and, at 925,000 tpa. tility.

$US1,930/t, close to two-year highs. That would seem to tally with anecdo- It’s ironic that just as international

This, of course, is also all about China, tal reports of new capacity coming online pressure is rising on China to rein in its

as the market tries to price in the poten- and restarts to take advantage of the im- aluminum smelters, the country is doing

tial for significant anti-pollution produc- proving price environment. precisely that in the form of an environ-

tion curbs next winter. The market is still digesting the impli- mental clampdown.

“Heightened instability”, it appears, cations of Beijing’s anti-pollution meas- But the three aluminum bodies are cer-

works both ways. ures in regions around the Chinese capi- tainly right when they refer to heightened

China has lifted its share of global pri- tal over the winter heating months from instability.

mary aluminum production from about mid-November to mid-March. China’s dominance of global produc-

10% in 2000 to more than 50%, with the A requirement that local aluminum tion has left the aluminum market highly

International Aluminum Institute’s (IAI) smelters cut capacity by 30% puts at risk vulnerable to shifts in the country’s pol-

latest figures showing that China pro- about 1.3mt of production, with poten- icy.

duced 54.4% of the global total in Febru- tial further hits from mandated closures That needs to be addressed and the

ary. of plants producing other smelter inputs G20’s steel forum is as good a template

Give or take a percentage point or two, such as carbon anode and pet coke. as any.

because even the country’s production Affected Chinese producers might be If nothing else, it could start with get-

numbers are unstable. expected to run their smelters as fast as ting a better statistical picture of just how

Annualised output dropped by 1.7mt in they can to compensate. much China is producing.

February relative to January, if you be- But Beijing’s environmental crackdown – Andy Home, Reuters

AUSTRALIA’S PAYDIRT APRIL 2017 PAGE 9