Speaking at an industrial conference, Antaike analyst Ms. Wang Hongfei claimed that the 2019 domestic primary aluminium market has been weak on both supply and demand sides, with a sharper decline in supply expanding the supply shortfall during the year. Domestic primary aluminium smelters have seen soaring profit margins y-o-y thanks to declining production costs during 2019. Of the 35.86 mtpy primary aluminium capacity in operation during November, 32.65 mtpy is operating with positive profit margins, meaning 89.4% of domestic smelters are profitable.
2019 saw primary aluminium capacity increase in parallel with decline. 2.39 mtpy of new capacity growth came from Yunnan and IM but there was a decline of 3.55 mtpy from Shandong and Henan. Domestic primary aluminium capacity is expected to grow by 0.7% y-o-y to 41 mtpy by end-2019. Of this amount 36.32 mtpy is operational, down 0.27% y-o-y. China’s primary aluminum output is estimated at 35.93 mln t, down 1.8% y-o-y.
Ms. Wang forecasted a slight oversupply in aluminium on the domestic market, with a shortfall on the global market in 2020. China’s primary aluminium capacity is expected to increase by 1.7 mtpy in 2020, half of which will come from Yunnan. With the capacity replacement scheme coming to an end, China’s total primary aluminium capacity is projected to be capped by 45 mtpy. On the consumption side, steady economic growth will continue to be the focus in 2020 – the last year of the 13th Five Year Plan (2016~2020). Despite aluminum exports being affected by trade friction, there will still be a global supply shortfall in the short term, consequently, China’s aluminium exports are not likely fall rapidly.