Both ends of the electrolytic aluminum industry are working together to solve difficulties
According to the "Economic Daily", since last year, electrolytic aluminum companies have implemented flexible production in order to reduce inventories. Many companies have focused on promoting the lightweight application of "substituting aluminum for steel". With flexible production and consumption expansion, the electrolytic aluminum industry has embarked on a road to resolve excess capacity and achieve industry upgrade and development.
On December 10, 2015, at the key electrolytic aluminum enterprise symposium held by the China Nonferrous Metals Industry Association, 14 participating enterprises, which accounted for 75% of the country’s electrolytic aluminum production capacity, promised not to restart the shutdown production capacity and further increase flexible production Scale, and promised that the completed production capacity will not be put into operation for at least one year. Since last year, electrolytic aluminum companies have implemented flexible production in order to reduce inventories. According to statistics from the China Nonferrous Metals Industry Association, the electrolytic aluminum industry reduced production by 5 million tons in 2015, accounting for more than 12% of total production capacity.
Flexible production is on the way
Due to overcapacity, since 2012, my country's aluminum smelting industry has suffered losses for three consecutive years, and the losses have continued to expand. In November 2015, the Shanghai Futures Exchange's March aluminum futures price fell to 9620 yuan/ton, a 20-year low. According to analysts from China Nonferrous Metals Industry Association, the current average full tax-included cost of the electrolytic aluminum industry is about 12,000 yuan/ton, which is higher than the current aluminum price. In Sichuan, Gansu, Qinghai and other regions, the average loss of producing 1 ton of electrolytic aluminum exceeds 3500 yuan; even in Shandong, where cost* is dominant, the average loss per ton is close to 1,000 yuan.
Under this background, the electrolytic aluminum industry must break through and overcome difficulties. From the supply side, it can only shrink production capacity, compress high-cost and high-polluting production capacity through marketization and administrative measures, and improve economic efficiency through mergers and reorganizations. Therefore, after copper, zinc, and nickel, electrolytic aluminum has also taken a step toward flexible production. According to Antaike's statistics, as of the end of 2015, the total production capacity of electrolytic aluminum that was shut down had reached 3.5 million tons per year, of which the reduction in production in the third quarter accounted for 42% and the reduction in production in the fourth quarter accounted for 37%.
The effect of the production reduction has already appeared. According to data released by the China Nonferrous Metals Industry Association, the national average daily output of electrolytic aluminum in October 2015 has fallen by 5,000 tons from the previous month. Compared with the output in June, the average daily output has fallen by 5,600 tons. Production cuts have eased supply pressure to a certain extent.
While the companies gather for warmth, industry associations also actively guide. The China Nonferrous Metals Industry Association recommends that companies study practical flexible production measures to help themselves in light of their own actual conditions. At the same time, in order to help companies get rid of the predicament, the Nonferrous Metals Association also actively advises relevant government departments, including suggesting to start the purchasing and storage mechanism and speeding up the formulation of supporting measures to guide the withdrawal of uncompetitive production capacity.
China Nonferrous Metals Industry Association Vice President Wen Wenjun said that under the current situation, it is necessary and feasible for enterprises to implement flexible production. Through flexible production, the aluminum price will return to the right path, and the industry can also take this opportunity to recuperate and embark on a healthier and more sustainable development path.