MIIT Released Aluminum Industry Status

On March, 5, Raw Material Industry Division of MIIT released aluminum industry status in China in 2018. Our country deepened supply-side structural reform in aluminum industry in 2018 by strictly controlling newly increased capacity of aluminum and promoting capacity replacement. The industry ran smoothly on the whole while trade frictions got prominent. Cost increased and benefit decreased, and general development was not optimistic.

Firstly, yield went up on a YOY basis while aluminum material slowed down its growth. In 2018, the yield of aluminum oxide, electrolytic aluminum and aluminum material was respectively 72.53 million tons, 35.8 million tons and 45.54 million tons, respectively up by 9.9%, 7.4% and 2.6% on a YOY basis. Among them, considering modification of statistic data, the growth of electrolytic aluminum presented a YOY increase of 5 percent points; aluminum material slowed down its growth by 7 percent points due to trade frictions and weak domestic consumption.

Secondly, price decreased and cost increased, benefit falling significantly. In 2018, domestic average spot price of aluminum was RMB 14262/tons, YOY down by 1.8%. Environmental protection policies, continuous rise in bauxite price and coal price, and increase in the cost of enterprise energy conservation and emission reduction, comprehensive aluminum manufacturing cost went up significantly on a YOY basis. In 2018, profit of aluminum industry was RMB 37.2 billion, YOY down by 40%. Among it, profit of mining and beneficiation achieved RMB 700 million, YOY up by 19.6%; aluminum smelting and aluminum processing achieved profit of RMB 11.2 billion and RMB 25.4 billion, YOY down by 54.6% and 31.4%.

Thirdly, capacity replacement accelerated and industrial structure was further optimized. Since the release of Notice on Capacity Replacement of Aluminum Enterprises in the Way of Merging and Restructuring (the former [2018] No. 12 of MIIT), more than 4 million tons of aluminum capacity has been successfully replaced inter-provincially, wherein, more than 3 million tons of capacity was transferred to energy-rich areas like Inner Mongolia and Yunnan. While strictly controlling aluminum capacity, our country has been making efforts to optimize structure of aluminum industry.

Fourthly, aluminum material export grew significantly and global trade environment was not optimistic. Due to the factors of fluctuation of price difference between domestic and foreign aluminum material and devaluation of RMB, our export volume of aluminum material in 2018 was 5.23 million tons, YOY up by 23.4%. Norsk Hydro closed its plant in Brazil so foreign countries were in short of aluminum oxide supply, which contributed to our net export volume of aluminum oxide, i.e. 950000 tons. Oversea bauxite developing projects like Aluminum Group and Weiqiao Pioneering Group are in steady progress. Chain reactions led by trade frictions of USA, EU, Mexico and Vietnam were getting prominent. External environment was getting harsh and future export of aluminum material would face severe conditions.

Domestic and foreign environment will get more complicated in 2019. Deep-seated influence led by trade frictions will be further manifesting. Downstream consumption is far from satisfactory and downward pressure of copper industry will continue. MIIT will go on deepening supply-side structural reform by cooperating with related departments to keep high pressure on increased aluminum capacity and strictly following capacity replacement strategies. We need to develop long-term mechanism to address the problem of excessive capacity via market-driven and legal methods and actively extend aluminum application so as to guide high-quality development of aluminum industry.