MI ANALYSIS: Explosive growth in Chinese aluminium, alumina production continues

The latest figures released by China’s National Bureau of Statistics (NBS) show that the country’s production both of primary aluminium and of alumina maintained an explosive growth rate in April.

Primary metal production rose by 38% year-on-year to 974,100t in April and by the same amount to 3,728,800t in the Jan-Apr period.

An alternative set of figures from the China Non-Ferrous Metals Industry Association (CNMIA) is due for release next week but over the first three months of 2007 at least the difference between the two bodies’ assessments was marginal.

China’s annualised rate of production in April was just shy of the 12 million tonne mark, which is significant because unless there is a major slowdown in the next few months, it means that production this year is comfortably going to exceed the 11.7 million tonne forecasts made both by the CNMIA and the Antaike research house. Both entities are close to the Chinese government, suggesting it too will be dismayed that production growth is still running at such untamed levels.

China’s production of primary metal has been growing at a fast rate for some time now but this year has seen a step-change. Growth of 38% over the first four months of the year compares with growth of 18% last year and of 19% in both 2005 and 2004.

It’s not hard to find the driver of this step-change since the only thing growing faster than China’s smelter output is its alumina production.

Alumina output was up by 65.3% in April and by 56.9% in Jan-Apr. Or to express that another way, output of just under 6 million tonnes in the first four months of this year was nearly 2.2 million tonnes higher than the same four-month period of 2006.

Annualised alumina production was running at nearly 21 million tonnes in April and as the chart shows, it is still rising…fast.

China’s domestic production dynamics seem to be locked in a vicious circle. Fast rising smelter output generated a significant shortfall of alumina. Local operators rushed to fill that gap with new alumina capacity. Better domestic supply of alumina at favourable prices seems to have encouraged smelter restarts, creating more demand for alumina, etc etc.

As with primary metal production both Antaike’s and the CNMIA’s original forecasts for alumina production to be around 20 million tonnes this year are looking decidedly conservative.