SHANGHAI (Interfax-China) -- The boom in China's aluminium exports is driving an increase in domestic aluminium production and consumption, industry insiders said at the China International Nonferrous Metals Market Conference 2007, held in Hong Kong Wednesday.
China is set to produce 12.4 million tonnes of primary aluminium this year, up 32% from last year, while capacity is set to reach 15.7 million tonnes, according to a prediction by Wang Feihong, a senior analyst with Beijing Antaike Information Co. Ltd., a leading consultancy affiliated with the China Nonferrous Metals Industry Association.
China's primary aluminium output reached 9.4 million tonnes in 2006, rising 20.4% from 2005 and soaring 117.5% from 2002.
China produced 8.15 million tonnes of aluminium products in 2006, making the country the world's largest aluminium fabricator. China was also the world's largest exporter of aluminium products last year, exporting 1.24 million tonnes of aluminium products.
"China's primary aluminium consumption was mainly invigorated by aluminium product exports, aluminium consumption for expanding aluminium plants, and its use as a substitute for other metals in downstream industries," Wang said.
Actual consumption stood at 25.08 million tonnes in the first quarter this year, climbing 45.3% from the same period last year, according to Antaike.
The construction of a 100,000-tonne aluminium production line normally requires 10,000 tonnes of aluminium for building electrolytic cells.
Wang predicts that China's primary aluminium consumption will increase to 11.75 million tonnes this year, rising 35.5% from last year.
Following China's policy to increase the export tax on primary aluminium from 5% to 15% on Nov. 1, 2006, domestic aluminium capacity has rapidly shifted to aluminium processing capacity, which has seen the output of mainly low-level and semi-finished aluminium products, vice director of the China Nonferrous Metals Industry Association, Wen Xianjun, said.
"However, China remains a net importer of high-level aluminium products. In 2006, China's net imports of high-precision aluminium strip amounted to 223,000 tonnes," he said. The average price of imported aluminium products in 2006 was $944 higher than the export price, according to Wen.
The dramatic growth in semi-finished aluminium product exports has prompted the government to consider reducing the value-added tax rebate (VAT) on aluminium products, and a policy is expected to be released during the second half of the year.
China exported 605,522 tonnes of aluminium products in the first four months of this year, up 95.6% from the same period last year.
"The government intends to reduce low-level aluminium product exports, and guide the industry towards higher value-added products," he said.
However, Wen believes that domestic consumption and the export of aluminium products will maintain its growth momentum for some time after the policy takes effect, supported by a growing global economy.
The production of aluminium plate, strip and foil will exceed 3 million tonnes this year, and the production of extruded aluminium products will climb to 4.51 million, Wen predicted.
China's aluminium products are mainly used in power grids, construction, transportation and electric appliance industries.
Downstream consumption of aluminium plate, strip and foil, and aluminium extruded products makes up more than 60% of domestic aluminium consumption.
China's aluminium fabricating capacity will grow 51% from 15.54 million tonnes in 2006, to 23.45 million tonnes in 2010, according to an Antaike prediction.
CNMIA's Wen commented that the growth rate in primary aluminium consumption will remain high until 2010, due to the rapid development of China's aluminium fabricating sector. Aluminium prices are directly connected to aluminium product growth, he said.
The use of scrap aluminium in aluminium product fabrication is still rather rare in China, due to restraints on the import of scrap aluminium, and a lack of aluminium recycling regulations, Wen pointed out.
"We predict that the average spot price of primary aluminium in the domestic market will be between RMB 19,500 ($2,549.12) and RMB 20,000 per tonne ($2,614.58) this year, while aluminium futures prices in Shanghai will remain on average at RMB 19,000 ($2,483.85) per tonne, supported by strong consumption this year," Antaike's Wang added.
China produced 7.18 million tons of base metals in the first four months this year, up 23.86 percent from the same period last year, according to statistics released by the National Development and Reform Commission on Tuesday.
Out of the 10 base metals produced during the first four months, electrolytic aluminum saw the largest increase in production by 1.084 million tons, up 39.44 percent year-on-year. This raised electrolytic aluminum production figure makes up 78.4 percent of the total increase in base metals production in the first four months of this year.
The NDRC attributed the electrolytic aluminum increase to a relieved alumina supply shortage, lowered alumina prices and aluminum smelters resuming operation due to the upward trend in electrolytic aluminum prices both in the domestic and overseas markets.
(c) InterFax-China 2007. For more intelligence on Chinese metals and mining, click here or contact David Harman in Hong Kong at david.harman@interfax-news.com or (852) 2537-2262.
