Old aluminium plants to be 'phased out' in 3 years
China will phase out high-cost and outdated primary aluminium units in two to three years, an executive at a key producer said, in a move that should check capacity growth for one of the country's most oversupplied commodities.
The closures should help prices of the metal in the country, its top consumer and producer, recover from a sharp drop of almost 30 per cent in the past four years.
"Demand and supply in China would be basically in balance in five years or longer," said Yu Dehui, vice-president in charge of the aluminium business at China Power Investment Corp (CPI), the second biggest producer of the metal in the country.
China is not likely to turn into a big importer of primary aluminium, he said at an industry conference in Hong Kong yesterday. Yu estimated China's total primary aluminium capacity at around 40 million tonnes in about three years, indicating an annual growth rate of less than 10 per cent from 31 million tonnes last year. This would be significantly below the yearly rise of about 20 per cent seen between 2003 and 2012.
The government last week pledged it would cut at least 420,000 tonnes of outdated aluminium capacity this year as part of a programme aimed at closing obsolete, inefficient and polluting industrial facilities.
Building of new capacity will also slow as heavily indebted local governments cut financial support to loss-making aluminium smelters. Mainland banks cut back on loans and pollution control efforts pick up pace, Wang Feihong, senior analyst of China Minmetals Non-Ferrous Metals, said at the conference.
About 4 million tonnes of new primary aluminium smelting capacity will be added this year in the country, Wang said, versus more than 4 million tonnes added last year.