Shanghai Futures Exchange's aluminum prices rebounded for two consecutive days, after a Ministry of Environmental Protection circular urged the metal sector to cut surplus supply, Chinese industry sources said Thursday.
SHFE's most active 1802 aluminum futures contract prices broke above Yuan 15,000/mt on Thursday to close at Yuan 15,125/mt ($2,269/mt), up from Yuan 14,745/mt Wednesday, SHFE data showed.
State Power Investment Corp in its Thursday aluminum sector report said the news that the ministry had said producers in Shandong Province had breached government rules by expanding surplus aluminum smelting projects had caused SHFE prices to move sharply higher.
MEP's Central Environmental Protection Inspection Team Chief Inspector Ma Zhongping this week told Chinese media that Binzhou and Liaocheng cities had vigorously developed surplus aluminum smelting projects, with their total aluminum output capacity having grossly exceeded (China's) controlled levels, thus breaking government rules.
Ma said some areas in the two cities have got used to building projects in a rush, without due regard for their environmental protection obligations, often asking the environmental protection bodies to give way.
MEP said in a circular on its website this week that after inspections in August and September, it found non-compliance and chaos (n the cities' aluminum and steel sector.
The ministry said back in 2014, Binzhou reported its ongoing 2.44 million mt/year aluminum projects as built capacity. Also, it has hidden some of its other ongoing aluminum projects, which did not comply with rules, the ministry said.
MEP also found that back in May 2014, Liaocheng reported the ongoing Chiping County-based Shandong Chiping Xinyuan Aluminium's 450,000 mt/year aluminum smelting project as a built project.
The ministry said since 2013, Shandong Weiqiao Pioneering Group has built 45 coal-fired power units, while Xinfa Group, built nine coal-fired power units, both of which broke the rules.
Moreover, MEP said during inspections, outdated capacity of 7.1 million mt/year iron smelting, and 5.94 million mt steel smelting capacity, owned by Rizhao Steel in Rizhao City were still running, though they were asked to permanently shut before end-2015.
MEP said the Shandong government should work out a rectification program and send it to State Council within 30 working days.
The ministry said as of October 31, it had asked 10,073 producers in the aluminum, steel, coal-fired power and other sectors in the two cities to rectify the situation, and fined 1,471 producers a total of over Yuan 100 million.
Binzhou City in Shandong accounted for 70% and 78% of the province's alumina and aluminum output in 2016, and 20% and 16% of China's national alumina and aluminum output last year, its data showed.
China's national aluminum smelting capacity surged to 43.32 million mt/year in February 2017 from 28.82 million mt/year in May 2013, with an extra 14.5 million mt/year new aluminum smelting projects after an MEP circular in April on reforming the aluminum sector, data from China Nonferrous Metals Industry Association showed.
