20 June 2022 – It is a horror scenario for buyers of Chinese aluminium when it suddenly turns out that the aluminium doesn’t exist and you’ve been the victim of a fraud. Are new energy restrictions coming? Chinese National Development and Reform Commission (NDRC) calls for new measures to ensure energy supply. And production capacities of steel, coke, oil refining, aluminium, cement and flat glass may not expand further in China.
China: billions in aluminium fraud
A horror scenario for buyers of Chinese aluminium. Apparently, a multi-billion dollar fraud involving non-existent aluminium has been uncovered in China.
The alleged fraud came to light last month in Guangdong when several companies discovered that the metals they were financing may not exist.
The allegations began at a single plant in the city of Foshan and involved several warehouses in Shanghai and Zhejiang province. Aluminium stocks at these facilities account for about 14% of the nationwide stockpile.
Damage of more than USD 1 billion, police investigate
So far, damages of more than one billion US dollars have been reported. However, the police investigation is probably still in its early stages and there is a possibility that many more cases could become known.
Not the first fraud case in China
This brings back memories of a similar case in China about 10 years ago. At that time, there had been a fraud with non-existent raw materials amounting to about three billion US dollars.
China: Are new energy restrictions coming?
In a recent article, China’s National Development and Reform Commission (NDRC) has called for rational and appropriate measures to be taken to further guarantee China’s power supply and avoid power rationing.
Coal must be imported at high cost
At the same time, the NDRC announced that in the future not only more coal would have to be produced, but also more coal would have to be imported to ensure the operation and energy production of coal-fired power plants. At the same time, the development of alternative energies – such as wind power – must be promoted.
Severe energy restrictions in 2021
Most recently, there had been massive restrictions and rationing of energy in China in 2021, especially for the production of aluminium and crude steel. And the NDRC’s call for more input into energy production is an indication that there could be renewed restrictions on energy production in China.
China: Biggest CO2 producers may not expand further
Seven ministries, including the Ministry of Ecology and Environment, recently issued the “Notice on the Implementation Plan for Synergistic Efficiency of Pollution Reduction and Carbon Emission Reduction”.
Affected sectors include steel, aluminium, coke, cement
The implementation plan presented clearly states that in the future it is strictly prohibited to increase the production capacities of steel, coke, oil refining, aluminium, cement and flat glass (with the exception of photovoltaic glass) in key areas for air pollution control.
In addition, 50% of all newly registered vehicles are to be powered by renewable energies by 2030.
Diversification in supply chains necessary
With regard to China, this heralds further challenges in the availability of key raw materials that should make buyers think outside the box. Diversification in the supply chains to gain more security in procurement is therefore sensible.
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