Record high global aluminum production - China speculation

Supply concerns in the aluminum market may be premature, according to yesterday's data from the International Aluminium Institute (IAI). The IAI reported that global aluminum production rose by 1.2% year-on-year to 5.2 million tons in February. On a day-to-day basis, there was even a new record set (185.8 thousand tons). The increase in production is exclusively attributable to China, whose data the National Bureau of Statistics already published at the beginning of last week (see Daily Info Commodities of March 15). However, this also carries the risk that global aluminum production could fall if Chinese smelters actually hit the brakes. However, the smelters would have to be forced to do so by local governments, as aluminum production in China has been very profitable for months due to high prices.

The Chinese data provider SMM gives the average profit margin of the smelters for last week as the equivalent of around USD 575 per ton. In our opinion, the Chinese smelters will therefore try to produce as much aluminum as possible for as long as possible. However, the fact that all the aluminum in China is not fully consumed and is therefore likely to be partly exported is shown by SHFE stock statistics: aluminum stocks have risen by two-thirds since the beginning of the year and are currently at a 10-month high. According to IAI data, 2.4% less aluminum was produced outside China. Production declines were observed in all regions covered by the IAI, except for the Asian countries ex China, where production remained constant. Regardless of the latest IAI production data, the LME aluminum price continued to rise yesterday. It has approached the mark of USD 2,300 per ton, above which it was last quoted in June 2018. This morning, the price is down around 2% on speculation that China may release up to 500k tons of aluminum from state reserves.

Source: Commerzbank Research, Photo: Fotolia