Aluminium oversupply in China is expected to lead a
bearish trend and inefficiencies in the market, stated a recent market
analysis by London based Barclays.
Smelters are hoping that their low-cost additions in the north west could help bring down average production cost for the whole group, so that they can avoid shutting down high cost units.
Capacity ramp-up in Xinjiang province is going on unhindered with Qinghai, Inner Mongolia, Shandong and Chongqing all adding capacity as well, the report added.
Analysts and producers the Barclays met with confirmed reports that there had been shut downs at high-cost locations such as Henan and Guangxi, to the tune of 400-450Ktpy.
Local governments who have promised various subsidies had in some cases begun to rescind those subsidies putting some producers under further pressure.
There was some discussion of whether the State Reserve Bureau (SRB) would make further purchases to support prices as the aluminium sector gets more government backing as high-level executives from SOEs have joined the cabinet.
However, the general feedback from the people was that it would only happen if production cuts began to exceed 1Mtpy.
Feedback on demand was similar to that in the copper market, with buying having improved in the past couple of weeks and likely to rise further for seasonal reasons during Q2.
However, with some market participants seeing much higher production than ourselves, of as much as 25Mt this year, any recovery in demand looks likely to be more than offset by strong supply growth.
Smelters are hoping that their low-cost additions in the north west could help bring down average production cost for the whole group, so that they can avoid shutting down high cost units.
Capacity ramp-up in Xinjiang province is going on unhindered with Qinghai, Inner Mongolia, Shandong and Chongqing all adding capacity as well, the report added.
Analysts and producers the Barclays met with confirmed reports that there had been shut downs at high-cost locations such as Henan and Guangxi, to the tune of 400-450Ktpy.
Local governments who have promised various subsidies had in some cases begun to rescind those subsidies putting some producers under further pressure.
There was some discussion of whether the State Reserve Bureau (SRB) would make further purchases to support prices as the aluminium sector gets more government backing as high-level executives from SOEs have joined the cabinet.
However, the general feedback from the people was that it would only happen if production cuts began to exceed 1Mtpy.
Feedback on demand was similar to that in the copper market, with buying having improved in the past couple of weeks and likely to rise further for seasonal reasons during Q2.
However, with some market participants seeing much higher production than ourselves, of as much as 25Mt this year, any recovery in demand looks likely to be more than offset by strong supply growth.
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