China’s Demand for Primary Aluminium to Keep Steady in 2010

Chinese demand for primary aluminium is likely to keep steady in 2010 according to several Japanese trader sources. Market players expect Chinese government may extend the scrap incentive measure for cars since the government had announced in early November to extend the home appliance subsidy measure for rural areas until the end of 2010.

An officer of Mitsubishi Corporation’s Shanghai branch told Japan Metal Bulletin that Chinese domestic car sales seem to reach 13 million units per year in 2009. Domestic demand for primary aluminium is also active from construction market thanks to public investment expansion and real estate price upsurge. In addition, home appliance sales keep strong in both coastal and inland areas with a support of the governmental subsidiary measure.

Meanwhile, domestic primary aluminium production is surplus against the actual demand weight. Chinese aluminium smelters including Chinalco have gradually increased their productions since spring 2009 to follow price upsurge in Shanghai Futures Exchange (SHFE). Chinese domestic production of primary aluminium hit record 1.2 million tonnes in September and 1.3 million tonnes in October.

Mitsubishi Corp’s officer suggested Chinese smelters have brought surplus ingot into SHFE to cash in. Primary aluminium inventory at SHFE designating warehouses currently totals 270,000 tonnes, the highest level since 2000. Chinese smelters are likely to continue high productions for a while. The officer said Chinese domestic ingot production may keep average 1.2-1.3 million tonnes per month in 2010.