China’s aluminum prices will rise steadily in the first half of 2021, and domestic smelters will continue to achieve healthy profit margins. Thanks to production cutbacks and inventory reduction driven by economic recovery and strong demand, Henan Shenhuo Group Chairman Li Wei said on the sidelines of the National People’s Congress and Chinese People’s Political Consultative Conference.
Primary aluminum capacity set at 45 million tons per year
On the supply side, the ceiling for China’s primary aluminum capacity has been set at about 45 million tons/year as part of the supply reform. While energy supply and environmental protection measures will affect the progress of new capacity.
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Global aluminum consumption to continue to rise
Meanwhile, global aluminum consumption will continue to rise as the world economy recovers from the effects of the corona virus. This will benefit domestic aluminum prices in the long run, according to state-run China Nonferrous Metals News, citing Li.
Optimistic outlook for primary aluminum prices and margins
Market sources are optimistic about the outlook for China’s primary aluminum prices and profit margins in the medium to long term. Due to the expectation that carbon neutrality will slow the rise in production. And favor downstream demand such as new energy vehicles and photovoltaic sectors.
Chinese aluminum producers struggle to cut energy consumption
China’s primary aluminum industry is struggling to meet lower energy consumption targets. Because production consumes a large amount of thermal energy. Chinese smelters will prefer to use hydropower once carbon emission quotas are traded in the market. Since the production cost of smelters will directly increase when using thermal energy.
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