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Xinjiang Halts The Illegal Aluminum Project Under Construction of Xinjiang East Hope

On April 14, the Changji Hui Autonomous Prefecture of Xinjiang issued the Announcement on Halting the Illegal Aluminum Production Capacity under Construction, in which the People's Government of the Prefecture decides to halt the illegal 2-million-ton aluminum projects under construction of 3 enterprises including Xinjiang East Hope Nonferrous Metals Co., Ltd. according to the State Council's Guidance on Resolving Serious Excess Capacity, important instructions of central leaders and the requirements of the Party Committee and People's Government of the Prefecture.

The list of halted illegal aluminum capacity projects under construction includes the 800,000-ton aluminum project under construction of Xinjiang East Hope Nonferrous Metals Co., Ltd., the 800,000-ton aluminum project under construction of Xinjiang Qiya Energy Aluminum Electric Co., Ltd. and the 400,000-ton aluminum project under construction of Xinjiang Jiarun Resources Holdings Co., Ltd.

In recent years, with the shift of domestic aluminum capacity to the west, Xinjiang has become a major province of aluminum production in China. In 2016, Xinjiang produced 6.356 million tons of aluminum, accounting for 19.4% of domestic production; Xinjiang became the second largest aluminum producer in China.

According to the list of the third batch of enterprises meeting Aluminum Industry Norms and Conditions issued by the MIIT, Xinjiang's standard aluminum capacity is 6.25 million tons and according to Baiinfo's data, Xinjiang's built aluminum capacity was 7.675 million tons at the end of March 2017. The built capacity of East Hope, Xinjiang Qiya and Jiarun Resources, which are in the list of halted illegal projects, is 1.6 million tons, 800,000 tons and 750,000 tons respectively, accounting for 41% of Xinjiang's built capacity, and exceeding the specified value of industry norms by 1.15 million tons.

The ineffective implementation of policy is the main cause for a dramatic increase in the capacity of the aluminum industry in the past three years, which is attributed to a lack of authorities effectively implementing the policy and the attributes and the cluster effect of the aluminum industry. The halted illegal aluminum projects under construction include not only the projects under construction, but the built projects that have been put into production, showing stringent requirements for the industry's supply-side reform. It is also a strong reaffirmation of the No. 41 document. Let's review the multi-level processing of excess capacity of aluminum specified in the No. 41 document issued in October 2013: 1) The built illegal capacity shall be completely removed; 2) The illegal projects yet to start construction shall not start construction; 3) The illegal projects that have started construction shall stop construction; 4) In case of projects necessary to be built, the construction of new capacity is forbidden according to the principle of equivalence or decrement replacement.

Zheshang Securities believed that the future supply-side reform of the aluminum industry should focus on more than 12 million tons of capacity increased between 2014 and 2016, accounting for nearly 30% of the domestic capacity built by the end of 2016, and will not allow the existence of built illegal capacity.