Hong Kong — The Chinese aluminum sector began output cuts on Wednesday to cut emissions in the winter heating season to March 15, 2018, with the Ministry of Environmental Protection set to conduct inspections at the producers by January, 2018, Chinese industry sources said Thursday.
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To tackle unlicensed emissions, the ministry is to carry out spot checks by January, 2018, as well as assess producers' output cuts, by checking their power consumption data through the power departments, according to the ministry.
A spokesman for aluminum producer Hongqiao Group in Shandong Province, North China said by phone that it fully supported China's supply side reform, so would cut output in the winter heat season to be in line with the government's request of cutting 30% of output in winter.
"Output cuts are expected to help ease the domestic aluminum surplus, supporting future prices," he said.
Following the news of Chinese aluminum sector's winter output cuts, Shanghai Futures Exchange's most active 1801 aluminum futures contract prices rebounded, closing at Yuan 15,480/mt ($2322) Thursday, edging up by Yuan 5, following falls on Tuesday and Wednesday, SHFE data showed.
Hongqiao has shut 2.68 million mt/year output capacity, about 29% of its total output capacity of aluminum products, to comply with the government's winter output cuts, according to the producer.
Due to the winter output cuts, Hongqiao forecast its 2017 aluminum products output would be 4% less than earlier forecast and that its 2018 production would be 8% less, assuming unchanged capacity.
This winter, Shandong Province is to cut over 30% of its aluminum producers' output (based on the electrolytic cell volume), and trim 30% of its alumina producers' output, with assessment of aluminum producers' emission licenses to be carried before the end of December, with those that fail to meet rules asked to shut, data from the Shandong province government showed.
Data from National Development and Reform Commission showed that a total aluminum smelting capacity of 3.21 million mt/year in Shandong Province did not comply with state rules.
In Henan Province, Central China, integrated aluminum, coal, power producer Zhongfu Industrial, with 1 million mt/year refined aluminum output capacity said in a filing to Shanghai Stock Exchange late Wednesday that it forecast it would lose a total refined aluminum output of 72,000 mt over the required period to comply strictly with the winter output cuts policy. It said it would make use of the shutdown to carry out energy-saving upgrades.
In Luliang City, Shanxi Province, Northwest China, another key Chinese aluminum production base, regional alumina output will be cut by 30% over October-March, according to the Luliang branch of Ministry of Environmental Protection.
Luliang, which produced 8.143 million mt alumina in January-September, up 6.7% year on year, is aiming to cap its alumina output capacity at 13 million mt/year by 2020, data from the Shanxi government showed.
Meanwhile, Lu Dongliang, Senior VP of Aluminum Corp of China told Chinese media at an aluminum seminar in Fuzhou City this week that in winter, the company would shut over 2 million mt/year alumina capacity of its 7 million mt/year total in the provinces of Henan and Shandong, resulting in an output cut of 600,000-700,000 mt.
State run metals consultancy Beijing Antaike forecast China's national aluminum output growth would slow in 2018 to 5.6% year on year, taking it to 38 million mt. It forecast Chinese refined aluminum output in 2017 would be 36 million mt, up 10.3%.