China has made great strides in easing surplus output capacity in the domestic aluminum and steel smelting sectors in the first half of this year, the Ministry of Industry and Information Technology said on its website Wednesday.
As of end-June, China completely banned the poor quality land steel operations, while in the first five months of this year, it permanently shut 84.8% of the 50 million mt/year outdated, obsolete surplus steel capacity to be shut this year, data from MIIT showed.
Land steel refers to steel products that are made of steel scrap, whose elements and quality cannot be effectively controlled during production.
Back on April 14, Changji City in Xinjiang Uyghur Autonomous Region, Northwest China ordered the shutdown of three aluminum smelting projects with aggregate capacity of 2 million mt/year, data from Hong Kong International Mining Association showed.
The three producers in Xinjiang whose aluminum smelting projects were asked to stop due to breaches of government rules were 800,000 mt/year aluminum project at Xinjiang East Hope, 800,000 mt/year aluminum project at Xinjiang Qiya Aluminum & Power, both in Huaidong District, Xinjiang, as well as one 400,000 mt/year aluminum project at Xinjiang Jiarun Resources Co in Manus County, Xinjiang, data from the Liaoning provincial government showed.
Around 12 million mt/year of built aluminum smelting capacity in China may be in breach of government rules, the China Nonferrous Metals Industry Association said back in June.
China had total built aluminum output capacity of 43.2 million mt/year as of the end of 2016, with 36.5 million mt/year operational, but only around 30 million mt/year of that capacity complied with government standards, according to CNIA.
Key Chinese aluminum producer Hangzhou Jinjiang Group said in its aluminum sector report issued in early July that after the Ministry of Environmental Protection's April 5 circular notifying the start of emissions control check over one year in the cities of Beijing, Tianjin, and 26 cities in the Beijing-Tianjin-Hebei and their surrounding areas, an estimated aluminum smelting capacity of 430,000 mt/year in 2017 and 1.14 million mt/year capacity in 2018 (710,000 mt/year in H1 2018, and 430,000 mt/year in H2, 2018) is seen reduced, not taking into account the upcoming rise in mainland China's national aluminum smelting capacity and operating capacity.
The Hangzhou producer said with China placing more and more emphasis on environmental protection as shown by the introduction of emissions control policy, thus resulting in further rise in Chinese aluminum production costs, there might be an imbalance in domestic aluminum products supply and demand in the short run, thus boosting bullish sentiments in domestic aluminum prices.
Shanghai Futures Exchange's most active 1709 aluminum futures contracts prices, to be delivered September this year closed at Yuan 14,510/mt ($21,765/mt) Wednesday, stable from Tuesday, but higher than in January, SHFE data showed. SHFE aluminum futures prices averaged Yuan 13,522/mt in January.
