Oversupply, China discourages aluminum production

BEIJING (Scrap Monster): China, the world’s biggest producer and consumer of aluminum has tightened measures to curb the over production in its aluminum sector to protect the environment and conserve the country’s resources, according to a notice issued by Ministry of Industry and Information Technology (MIIT).

Chinese government has also decided to discourage all privileges given to aluminum producers in the country. China’s aluminum sector profits decreased 41.8 percent in the first two months of 2001 as a result of the strong competition and over production in the market.

China's aluminum production capacity reached twenty three million tones and its output topped 15.6 million tones. Aluminum smelting consumes a lot of energy and resources, so the government has decided to protect the environment and conserve resources.

China's primary aluminum production also rose to record high at 1.428 million tonnes in March up nearly 1% from the previous May 2010 record even as Beijing has pushed for aggressive consolidation in the industry. However, many aluminum smelters have increased production and started new capacity after local power supply rose in late February.

Aluminum smelting consumes about 6 percent of China’s total electricity use, according to Shanghai Metals Market. China has issued regulations to rein in excess aluminum capacity expansion since 2003. Sales profit rates averaged only 3.59 percent in the January-November period last year though the sector reported 10.44 billion Yuan in total profit.

Following the move China will also halt approvals for new smelters to curb overcapacity. The government will also suspend electrolytic aluminum and forbid any practices to expand production capacity in the sector.

Earlier the local governments in China encouraged aluminum production seeking quick economic growth paving way to overproduction in the sector.

According to the notice, production capacity of the sector might exceed 30 million tonnes at the end of 2015, if all the currently proposed 23 electrolytic aluminum projects, with 7.74 million tonnes of capacity and 77 billion Yuan (11.79 billion U.S. dollars) of investment, were finished.