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Citi reported that China's clean-up of illegal projects in the electrolytic aluminum industry could lead to the closure of up to 5 million tons of capacity, which is equivalent to 11% of existing capacity; This includes 3.
1 million tonnes of operating capacity, equivalent to 8%
of capacity.
Citi believes that "there are upside risks to China's aluminum prices", but it will leave its existing supply forecast unchanged and wait for more policy details
.
A few days ago, the National Development and Reform Commission and other departments issued a notice document on the "Action Plan for Cleaning Up and Rectifying Illegal Projects in the Electrolytic Aluminum Industry"
.
For newly constructed projects that violate laws and regulations after May 2013 and projects that have not implemented the handling opinions of Document No.
1494, the construction of those under construction should be stopped immediately, and the completed
projects should be stopped immediately.
In particular, newly constructed illegal projects after May 2013 should be dealt with
quickly.
Strict control of new production capacity on the supply side is expected to set an upper limit
for the total production capacity of electrolytic aluminum.
The statistical report shows that the electrolytic aluminum production capacity under construction in the country in 2016 was 7.
37 million tons, which should be the upper limit of the new electrolytic aluminum production capacity in the future, and the total production capacity is expected to reach 46.
015 million tons
.
However, with the gradual implementation of the capacity reduction policy, especially next week, the key node of declaring illegal production capacity will be ushered in, and the supply and demand pattern of the electrolytic aluminum market will be clearer this year
.
If the increase in aluminum prices in the first half of the year reflects the boost of the de-capacity policy to the market mentality, then the size of the next illegal capacity declaration scale will determine how deep the de-capacity knife is cut, and how far
the price rally can go.
Analysts pointed out that although the current aluminum price has good resistance to decline, the cost line support below is still obvious, a few days ago the Internet rumors that Shandong is about to introduce a policy document to reduce production capacity, but there is no movement, the market has doubts about the actual impact of capacity reduction, market merchants are generally cautious, from the recent national attitude to capacity reduction to maintain a consistent tough attitude, steel capacity reduction has been completed more than half, nonferrous industry electrolytic aluminum capacity is not far away, from the current situation, The specific time of electrolytic aluminum to capacity is still a mystery, if the electrolytic aluminum capacity reduction policy can be implemented, the aluminum price is expected to usher in a wave of rebound after the market, if it is "thunder and rain", aluminum prices are difficult to say optimistic
in the short term.
