China’s Aluminum Production at 15-Month High to Pressure Prices

  • World’s top maker cashes in on rally with new plants, restarts
  • ‘The smelters are coming back in a rush,’ says AZ China

China’s aluminum output surged in September to its highest in fifteen months as new and idled plants were fired up, threatening to undo this year’s rally in prices.

The nation that accounts for more than half of world output churned out 2.75 million metric tons, up 1.2 percent from a year earlier and a third monthly increase, the statistics bureau said Wednesday. It would also be the biggest volume since June 2015, according to International Aluminum Institute data. Smelters that had shuttered at the end of last year have returned to production to cash in on the rally, just as new low-cost capacity is also being brought online.

The metal rose 15 percent on the Shanghai Futures Exchange through the first nine months and banks including Citigroup Inc. and Deutsche Bank AG have warned of a retreat as output gains accelerate.

“The smelters are coming back in a rush now, so that’s a concern,” Paul Adkins, managing director of aluminum consultancy AZ China Ltd., said by phone. “For the rest of this year, two million tons of annual capacity is guaranteed to come in and guaranteed not to exit.” That’s “going to put a lot of pressure on prices when we get to November or December onwards,” he said.

Basic materials including aluminum and steel have increased this year on better-than-expected demand in China amid a credit splurge by the government to arrest economic slowdown, buoying markets from multi-year lows. China’s aluminum output for the year to date remains lower than a year earlier, down 1.4 percent to 23.44 million tons.

Aluminum in Shanghai fell 0.9 percent to 12,670 yuan ($1,880) a ton by 10:45 a.m. On the London Metal Exchange, it rose 0.3 percent for a year-to-date gain of 9.7 percent.

— With assistance by Martin Ritchie

Before it's here, it's on the Bloomberg Terminal.