Views:2 Author:Site Editor Publish Time: 2017-11-23 Origin:Site
Aluminium prices rose towards a six-year high on Thursday, the latest commodity to be buoyed by China’s efforts to cut supply to curb pollution.
The price for a tonne of aluminium on the Shanghai Futures Exchange climbed as much as 3.2 per cent to Rmb16,650 ($2,500) a tonne, putting the contract on track for the highest close since 2011. Steelmaking ingredient iron ore has risen to its highest level in five months, while zinc prices are at their highest level in 10 years.
China has laid out plans to cut pollution in its northern provinces starting in October, just as the ruling Communist Party is set to hold its 19th party congress, which will announce a new generation of leaders. That is raising hopes that ordered cuts to aluminium and steel output will be enforced, supporting prices.
For aluminium that message was reinforced by a meeting of China’s State Council, where premier Li Keqiang reiterated aims to close production capacity.
“He stressed that the current policy will be implemented strictly. That was very positive to the market,” said Yanchen Wang, an analyst at CRU.
China Hongqiao, the world’s largest producer of aluminium, this month confirmed it would cut annual capacity by 2.68m metric tonnes, about 30 per cent of its total, after a related company “misconducted the construction” of five plants.
“Demand growth will outpace capacity growth from 2017 onward, resulting in improving utilisation rates and higher aluminium prices,” said analysts at Citi.
JPMorgan analysts forecast aluminium prices would rise another $100 a tonne in the fourth quarter, noting they “have been well supported by collective realisation that supply reform is a reality, despite Chinese aluminium inventories more than quadrupling so far this year”. Share this graphic “However,” they added, “these higher prices will probably prompt smelters outside of China to initiate restarts, pushing the global market into a surplus.” Global producers are already suffering. In March an international coalition of aluminium trade unions called for the creation of a global forum to tackle soaring output from China, the world’s largest producer. CRU’s Mr Wang cautioned that a correction in the market might soon be due because of weak demand. “Downstream players still struggle because of credit issues and they don’t want to buy raw materials from smelters because it’s too expensive for them,” he added. Graham Kerr, chief executive of aluminium producer South32, said it would be difficult for the government to shut aluminium production just over the winter, since aluminium plants could not be easily turned on and off. “You’ll continue to see pressure applied to aluminium where you see old or even illegal operations, but I’m slightly intrigued to how they stop these operations just in the winter months,” he said. “And there’s still a large amount of new supply that’s coming to the marketplace that is more environmentally friendly.”