China aluminium demand hit by cooling property market

The mainland's aluminium smelters are likely to increase the supply of metal in the domestic spot market for the rest of the year because a slowdown in real estate investment has cut demand from aluminium users, analysts and sources at smelters said.

New construction was 9.3 per cent lower in the first nine months than a year before, reversing a 13.5 per cent rise for the whole of last year.

Real estate accounts for about a third of demand for primary aluminium in the mainland, the world's top consumer and producer of the metal. Analysts estimate demand usually comes in about eight to 11 months after construction starts.

Just as demand has fallen away, production of primary aluminium has jumped, hitting a record high for the fourth consecutive month in September as new capacity has come onstream.

This supply and demand situation could weigh on local prices, boosting the mainland's exports of semi-finished aluminium products, which have already risen nearly 10 per cent in the first nine months.

Exports of primary aluminium are unlikely to surge due to a 15 per cent tax but exports of semi-finished products benefit from tax rebates of 13 to 15 per cent.

Spot aluminium, at about 13,620 yuan (HK$17,203) a tonne on Thursday, has fallen nearly 10 per cent from this year's high in September, which was supported by strong exports of semi-finished products, firm prices on the London Metal Exchange and first-half production cuts by some smelters.