Some China Al Smelters Adjust Output under Loss Making Price

Some Chinese aluminium smelters started production cut. They apparently adjust the production plan under less profitability condition when aluminium market price keeps low level at Shanghai Futures Exchange (SHFE) and Chinese government changed power supply policy. A trader source in Shanghai office of major Japanese trading house said some smelters started to reduce the production. The source said actual aluminium demand in China is still strong for automobile and appliances.

Many aluminium smelters lose money in high power cost areas including Chinese coastal areas and Henan province under low level aluminium market at SHFE after Chinese government terminated favorable power policy in June, according to Japanese trader sources. Under the condition, some smelters started to reduce the production since June. Many smelters reduce the output by around 10%.

Japanese industry interests estimate Chinese smelting cost is around US$ 2,100 per tonne. SHFE aluminium price recovered 15,000 yuan per tonne but the price is till around US$ 1,930 per tonne level. The loss making operation would encourage the production cut for Chinese makers.

Chinese automobile sales were around 1.41 million units in June. The sales decreased from 1.55 million units in April but the level was still high. Japanese trading firm source sees air conditioner sales are still strong mainly in rural areas due to subsidiary support by the government. However, construction demand is cooled when the government tries to squeeze overheated real estate investment in coastal area.