China’s primary aluminium output witnessed a significant surge in August, reaching an all-time monthly high. According to data released by the National Bureau of Statistics (NBS) on Friday, China’s output rose by 3.1% year-on-year to a striking 3.6 million metric tons. The surge is chiefly attributed to ramped-up production in the southwestern province of Yunnan, following the recovery of hydropower generation.
The figures also indicated a 3.4% increase from July’s output. In terms of daily figures, August saw an average aluminium output of 116,129 tons, as per Reuters‘ calculations.
Notably, during August, an annual capacity of 390,000 tons was revived, translating to 32,500 tons on a monthly scale. Most of this resurgence in production can be credited to Yunnan, as outlined by a survey from consultancy firm Mysteel.
Historically, from September 2022 until June, firms in China’s fourth-largest aluminium producing region faced orders to reduce their output caused by a drought that led to a sharp drop in hydropower capacity. However, the third quarter heralded an increase in operations in Yunnan, compensating for a decrease in Shandong province, which implemented planned cuts to meet stringent carbon emissions targets.
Another factor propelling Yunnan’s aluminium production is the favorable profit margins. These margins have been buoyed by rising metal prices, a result of government interventions to bolster the property market. The property market, alongside transportation and packaging, remains the dominant consumer of this light metal.
Financially, the Shanghai Futures Exchange’s most-traded aluminium contract marked a 3.8% elevation last month, the steepest monthly climb since November.
Cumulatively, from January to August, China’s aluminium production tallied at 27.23 million tons, marking a 2.9% increase year-on-year.
Looking forward, analysts anticipate that September’s output will likely mirror August’s figures. Yunnan, currently blessed with ample rainfall and water supply, seems poised to continue its robust production trend through September and October. This insight comes from Li Jiahui, an aluminium analyst at Shanghai Metals Market (SMM).
However, Li also voices concerns regarding potential consumption patterns. If consumption doesn’t see a solid rebound, the elevated output might inflate inventories, consequently suppressing prices.
In a broader perspective, production of 10 nonferrous metals, encompassing aluminium, copper, lead, zinc, and nickel, soared by 6.1%, reaching 6.29 million tons year-on-year. The year-to-date output for these metals also registered a 6.8% growth, culminating at 48.56 million metric tons. The additional metals in this category include tin, antimony, mercury, magnesium, and titanium.