We estimate that in the fourth quarter of this year, approximately 1.5 million tons of electrolytic aluminum capacity in China will be affected.
With the increase in the pressure on the “Eleventh Five-Year Plan†energy conservation and emission reduction targets, various places have recently increased the regulation of electricity consumption and production capacity in high energy-consuming industries. We estimate that in the fourth quarter of this year, approximately 1.5 million tons of electrolytic aluminum capacity in China will be affected. At present, the domestic electrolytic aluminum production capacity is about 21.5 million tons, and the affected production capacity accounts for about 7.0% of the total domestic production capacity.
At the beginning of September, aluminum plants in Guangxi and Guizhou have been required to reduce production, involving a total capacity of about 750,000 tons. Recently, Henan Province also proposed to impose restrictions on local electrolytic aluminum production in the last three months. Among them, the aluminum electrolysis cell of 160 kA and below was shut down for maintenance, and the aluminum electrolysis cell of 180 kA to 300 kA was subjected to a rotation of 30%; in the following three months, the province's output of electrolytic aluminum was limited to 180,000 tons (this is equivalent) At an annual capacity of 720,000 tons, the electricity consumption is reduced by 2.5 billion kWh.
In fact, recent data released by the National Bureau of Statistics has shown that domestic electrolytic aluminum production has begun to fall. In August, the domestic output of electrolytic aluminum was 1.388 million tons, up 20.4% year-on-year, but down 2.0% from the previous month. The annualized value in August was 16.53 million tons, which was 340,000 tons less than the 16.69 million tons in July. Since some aluminum plants are still on the verge of losses in China, production enthusiasm is still low.
We expect that with the approaching of the "Eleventh Five-Year Plan", provinces and cities will continue to increase energy conservation and emission reduction, and the affected electrolytic aluminum production capacity is likely to continue to increase. Domestic electrolytic aluminum production will fall further in the fourth quarter.
On the international front, developed countries such as the United States, Europe and Japan have recently made statements, claiming that they will implement quantitative easing policies to boost the economy, and investors' concerns about the resurgence of global liquidity have greatly increased. In the short term, base metal prices still have the strength to rise.
In terms of price, since September, domestic aluminum prices have steadily rebounded and stood above 16,000 yuan/ton. The aluminum plant is expected to resume profitability and begin to bottom out. We expect aluminum prices to continue to rise, aluminum companies' profitability will continue to improve, and the electrolytic aluminum sector will face trading opportunities.
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