The implications of the supply side reform for aluminum ...
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The implications of the supply side reform for aluminum industry-will curtailment sustain? Shanghai, 25 May, 2016 13 th Shanghai Derivatives Market Forum Wan Ling, Head of Asia, Aluminium
Transcript of The implications of the supply side reform for aluminum ...
The implications of the supply side
reform for aluminum industry-will
curtailment sustain?
Shanghai, 25 May, 2016
13th Shanghai Derivatives Market Forum
Wan Ling, Head of Asia, Aluminium
Structure of presentation
3
4
1 Supply side reform
2 Aluminum capacity developments and closures
Demand to remain firm and help the supply side
Restart of the closed capacity is slow
2
5 Conclusions
Slide 3
What does supply reform mean for aluminium ?
We have seen the explosive growth of Chinese capacity
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China aluminium primary capacity
China primary consumption
000s tpy
Source: CRU Aluminium Market Outlook
China closed 3.8Mtpy aluminum smelting capacity in
2015
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The capacity closures by aluminum smelter in China in 2015
'000tpy
Data:CRU
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World production: Curtailments lower production in China and USA
Source: CRU April Aluminium Market Outlook, 2016
Restart pace is slow for the moment
Smelter
Capacity to restart
('000 tpy) Restart date Notes
Zhaofeng 120 16-Apr Restarted in early April
Shanxi
Taiyuan 50 16-Mar
Restarted in late
March - early April
Chongqing
Qineng 50 16-Feb
Restarted in late
February
Aba 67 16-Mar
Full restart by June
2016
Guizhou
Tongzi 50 16-Apr
Full restart by June
2016
Qinghai Xinye 100 16-Mar
Full restart by June
2016
Total 437
Restart process is slow due
to:
-Power tariff hike after the
aluminum prices rallied
-The smelters find it difficult
to get the amount of the
money to get the idle
capacity restarted
-Tightness of cathode block
as the demand for the
cathode block increased
suddenly in a short time
Chinese smelters are heavily dependent on
coal-fired electricity
The percentage of primary aluminium output
based on self-generated power keeps rising
Output, tonnes Percentage
Data: CRU Aluminium Smelter Power Tariffs Report 2016
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Inner MongoliaLiaoning
Shaanxi
Shandong
Henan
Hubei
Hunan
ChongqingSichuan
Yunnan
Guizhou
Guangxi
Fujian
Gansu
Xinjiang
QinghaiNingxia Shanxi
The weighted average power tariff by province in 2016
RMB/MWh
Data: CRU Aluminium Smelter Power Tariffs Report 2016
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World aluminium smelting Business Costs (BC) in January
2016
Source: CRU Aluminium Cost Service
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Africa China India
Middle East Australasia Central & South America
Europe Eastern Europe and Russia Western Europe
North America
Aluminum smelting capacity additions, 2015-2020
'000tpy
Data: CRU
World’s aluminum smelting capacity additions will be
mainly from Shandong, Inner Mongolia, and Xinjiang
8%+
6 - 8%
4 - 6%
2 - 4%
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< 0%
Aluminium demand to grow strongly in OBOR countries
3%
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5%
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%
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4%
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%
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3%
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Primary aluminium consumption by
region CAGR 2015 – 2025 (%)
Data: CRU
China will increasingly turn to export aluminium products
Fabricated products HS codes 7610-7616
There are more further final goods not captured in chart above e.g. motor bikes
Data: CRU, GTIS
Conclusions
-China closed 3.8Mtpy capacity in 2015 in respond to the low
aluminum prices and supply side reform. The restart pace is slow
for the moment.
-World’s smelting capacity additions will be mainly from the three
provinces in China, Shandong, Inner Mongolia, and Xinjiang.
-Primary aluminum demand is expected to remain firm in China,
which will help the supply side reform in China.
-China’s aluminum downstream is moving to high value added
products. The majority of the products will be consumed in the
domestic market, but the international market is a key target
market for Chinese aluminum semis products.
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