The National Development and Reform Commission, China's top economic planner, and eight other agencies would release a policy putting brakes on all proposed new electrolytic aluminum projects in order to curb overcapacity in the sector, said Su Bo, the Vice Minister of the Ministry of Industry and Information Technology (MIIT).
In the short run, GPC (green petroleum coke) market, the upstream sector of electrolytic aluminum industry, would remain intact as vast GPC demand is still needed to meet demand of many on-going construction electrolytic aluminum projects, which are not involved in the policy.
Domestic electrolytic aluminum industry would still see a large expansion contributed by on-going construction projects in 2011. Correspondingly, GPC demand would still benefit from the expansion, C1 deemed.
The electrolytic aluminum sector would launch 3.718-mil-mt/yr of new production capacity in 2011. Total capacity would increase 17% from 2010, according to statistics from Shanghai Metals Market (SMM), the leading integrated service provider in China’s non-ferrous metal market.
Based on such expansion, SMM estimated domestic electrolytic aluminum output would gain 2.377-mil mt. Thereinto, the northwestern region would take up as high as 1.02-mil mt.
Take the northwestern region where most electrolytic aluminum projects were under construction at present as an example, GPC demand would accordingly gain 660,000mt/yr to 3.17-mil mt/yr, C1 estimated. In 2010, GPC production capacity totaled 2.7-mil-mt/yr in the region and local GPC output were merely 1.6-mil mt, C1 found. For feeding greater demand from the electrolytic aluminum sector alone, the region would have to outsource GPC from the eastern part of China.
However, in the long run, the policy would crimple expansion of the electrolytic aluminum sector and hence GPC demand from the downstream sector.
The electrolytic aluminum industry would slow down demand growth in GPC as the government would give no nod to new electrolytic aluminum projects in the coming three years. Moreover, the environment-protection and energy-saving targets set for the Twelfth Five-Year Plan (2011-2015) would restrain development of the energy-intensive sector as well.
On the other hand, domestic refineries were active in expanding refining and coking capacities. C1 estimated domestic GPC output would increase by 11% in 2011, while consumption growth rate would be merely 7.3%.
Amid slower demand growth and enthusiastic output expansion, GPC oversupply would be resulted and would get more serious in the coming 5-10 years, C1 estimated.
