Surging aluminium price squeezing processors’ profits – Nanshan exec

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TAIYUAN, China (Businesshala) – Aluminum processors in China are facing thin profits this year due to rising metal prices, the chairman of Shandong Nanshan Aluminum Co Ltd said on Thursday.

FILE PHOTO: A worker works in a production line of aluminum rolls at a factory in Zhuping, Shandong Province, China November 23, 2019. Businesshala / Stringer

The prices of aluminum, used in products ranging from food cans to airplanes, have risen more than 50% this year due to strong demand and production cuts due to the energy crisis and flooding in top producer China.

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“Aluminum prices have jumped significantly … .

The most-traded November aluminum contract on the Shanghai Futures Exchange reached its highest level since May 2006, while the three-month aluminum contract on the London Metal Exchange was at its strongest since July 2008.

Graphic: Aluminum Prices

Electricity prices have hit record highs in recent weeks, driven by power shortages in Asia and Europe, with China’s crisis expected to last through the year, slowing growth in the world’s second-largest economy Is.

Graphic: Global coal prices surge due to fast-growing electricity use, limited supply in China

Power-intensive aluminum smelting is expected to be one of the most affected metal sectors.

Lu expects fabricators’ revenue this year to be weaker than in 2020 and they will face even tougher times after October.

“Upstream high aluminum prices have already been transmitted to fabricators, and fabricators have to shift costs to the downstream area,” Lu said, adding that it was uncertain whether aluminum end users would accept it. .

China’s State Reserve Bureau has sold 280,000 tonnes of aluminum so far this year in an effort to reduce prices, but Lu said volumes are “very small” and will not have a major impact.

Analyst Wang Weidong of state-backed research house Antique said rising prices of metals like magnesium and silicon — ingredients in aluminum alloys — also hurt fabricators.

Wang said aluminum consumption this year has been below market expectations, especially in the property and infrastructure sectors.

Chalco Trading Group chief analyst Yao Zizhi warned that production could suffer due to recent power restrictions, with China calling for residential use to be prioritized.

Antaike estimates that the Chinese aluminum market will fall into a deficit of 200,000 tonnes in 2022, from a surplus of 180,000 tonnes this year, and Chinese state reserve sales are projected to be 300,000 tonnes next year.

Graphic: Aluminum Balance

Reporting by Min Zhang in Taiyuan and Mai Nguyen in Hanoi; Editing by Mark Potter and Jan Harvey

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