Chinese aluminum prices seen capped by new capacity

Posted by tjdetai on July 8th, 2015

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Reuters reported that Chinese aluminum prices may be capped by record production and weaker demand over the coming two months as new capacity comes online which could lead to a boost semi-finished product exports.

Industry sources said that monthly production in China, the world's top producer and consumer of primary aluminum is expected to reach fresh record highs in June and July as an estimated 1.5 million tonnes of new annual capacity is slated to come on stream.

Mr Heng Kun senior analyst at Essence Securities in Shanghai, citing the new capacity said that "Chinese aluminum prices are unlikely to rise in the coming two months. Data from the national Bureau of Statistics showed that China's aluminium output hit a monthly record of 1.46 million tonnes in April.”

China produced 8.2 million tonnes of semi finished aluminum products such as profiles and plates in the first 4 months of 2011, up 37 percent on the year. Exports rose 38% on the year to 880,000 tonnes.

Analysts said that last week's rise in local aluminum prices had been supported by China's power shortages and last week's power price hikes, which could raise production costs and force some smelters to cut output.

A smelter source said that increased exports of semi finished products have underpinned metal consumption and the exports would rise further in June and July due to firm LME prices. The exports are also allowed 13% tax rebates. But Chinese smelters were unlikely to export primary aluminum given the metal carries 15% export tax and is not subject to any tax rebates.

The smelter source said high semi exports had pushed down aluminium stocks in major retailing bases in Shanghai, Wuxi and Hangzhou and Nanhai to near 600,000 tonnes from above 600,000 tonnes in May based on the firm's figures.

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